While keeping affairs organized is important for all adults, life partners who do not marry need to be especially careful. Without an estate plan, asset distribution is subject to state laws of intestacy, which by and large predate modern family arrangements. With diligent planning, partners can lookout for the well-being of each other.
Intentions: Self and Others
Even before attending to asset planning, it’s wise to designate a power of attorney, trusted to make decisions in the event of a capacity decline:
Power of attorney (POA) grants someone the authority to manage your financial and/or medical affairs if you become incapacitated. A medical POA agent manages your healthcare, a financial POA manages your finances, and a general POA manages both. Your POA agent should be someone you can trust to be responsible and keep your best interests in mind, so your partner is likely a good candidate.
Another smart and relatively easy step into estate planning is to check on and update the beneficiary designations of all accounts: “Your bank accounts, retirement accounts, and life insurance policy should all have a designated beneficiary. If you want your partner to inherit those assets, make sure to name them as the beneficiary. The beneficiary designations on these accounts override a will, so they are typically non-probate assets.”
When it comes to major, titled assets, like homes or vehicles, setting up joint tenancy
can also be particularly strategic for unmarried partners: “Unlike community property, if one of you passes away, the other will automatically inherit any property held in joint tenancy. This will also help you avoid probate, even if you don’t have a will or a trust. You and your partner will need to put both of your names on the asset’s title document, such as the deed to your house.”
Establish A Revocable Trust
Once arrangements have been made for power of attorney, beneficiaries are designated on all accounts, and joint tenancy put in place for titled assets, it’s time to anchor the estate plan, and this is where trusts can really come in handy. As the names imply, revocable and irrevocable trusts have different purposes, so it’s a good idea to understand how each could be helpful, depending on the circumstances. Given their flexibility, revocable trusts are most commonly used. Also referred to as living trusts, revocable trusts can indeed be a very practical and useful tool in estate planning:
A revocable or “living” trust holds ownership of your assets after your death and dictates how you wish them to be distributed. Because the trust legally owns the assets, instead of you as an individual, this strategy offers many benefits. For example:
- The assets held in a trust avoid probate and are not public records—wills, on the other hand, are public and must go through probate to be validated.
- With a living trust, you can avoid probate. This means your partner and other beneficiaries will be able to have immediate access to their inheritance.
- Living trusts are flexible, allowing you to access the assets and modify the trust at any point during your lifetime. And after you pass away, the trust becomes irrevocable, which means it cannot be changed by anyone.
When a trust is established, it’s a good idea to also put a pour-over will in place. Essentially, “a pour-over will is a type of failsafe that works in conjunction with a living trust. It states that any assets not placed into the trust…will immediately be transferred to the trust upon your death, so they can avoid probate … .You will need to name an executor to manage your estate and you will need to make sure it is signed and witnessed according to the law.”
Remember, once an estate plan is set up, it needs to be periodically reviewed and experts recommend doing so, thoroughly, every 3-5 years, making adjustments in correspondence with life’s twists and turns. In addition to major life events, such as births, adoptions or deaths in the family, keep in mind other occurrences that may necessitate changes to asset allocations in the estate plan, such as:
- Purchasing a home or other large asset
- Borrowing a large amount of money or taking on liability for any other reason
- Large increases or decreases in the value of assets, such as investments
- Changes in federal or state laws covering taxes and investments
- Career changes, such as a new job, promotion, or if you start or close a business
Designate Fiduciaries
A critical step when making and updating estate plans, is the designation of one or more loved ones, friends or professionals who are prepared to serve in a fiduciary capacity as they carry out the goals specified in our plans. Depending on the circumstances and region, a fiduciary may be specifically referred to as an executor, personal representative, or trustee Regardless of the details of an estate plan, the appointed fiduciaries have a legal responsibility to honor the plans–and the law. Accordingly, when representatives are designated, fiduciary bonds, often referred to as estate bonds, may be required.
Learn more about estate bonds right here. At Colonial Surety Company, a leading national provider of all types of fiduciary bonds, the steps to obtaining estate bonds are easy: get a quote online, fill out the information, and enter a payment method. Print or e-file the bond from anywhere—even the law office.
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