P is for Planning, Not Palimony: Estate Planning for Unmarried Couples

States Differ in Property Rights for Unmarried Couples

What legally defines marriage in your state? If you live in Kansas or Iowa, you can be legally married without a marriage license—as long as you meet the requirements of common law marriage, such as long-term cohabitation. But in most states, common law marriage is not valid, and property rights for unmarried couples are virtually nonexistent. In this case, estate planning in the form of a cohabitation agreement or will is necessary to protect your assets.

In my state of Illinois, unmarried cohabiting partners who break up have no rights in the property of the other. In other words, the law of property division and alimony or support that applies to divorcing spouses does not apply to unmarried couples who separate. Unmarried couples need to think through estate planning like a lawyer – and possibly with the help of one.

Blumenthal v. Brewer

The Illinois case, Blumenthal v. Brewer, involved a county judge and a medical doctor. They lived together for 25 years, raised three children and acquired three homes. They sued each other over the division of their primary home and the ownership of the doctor’s practice. In the end, the judge was told she had no right to any part of the doctor’s practice even though she had invested money.

The case provides a timely reminder that the law confers certain advantages or qualities on married couples. This is true in the arena of estate planning. Consider the following:

• Under the labor law known as “ERISA,” a married person must name his or her spouse as the beneficiary of any qualified retirement plans.
• State laws across the country seek to stop a married person from disinheriting his or her spouse. There is a public policy against a person impoverishing his or her spouse at death. If I execute a will leaving all my property to my children, Illinois law provides that my husband nonetheless gets one-third of my property. In other states, this protection extends to all of a person’s property, no matter whether it passes by will, corporate trust, beneficiary designation, joint ownership or other means.
• A surviving spouse is often eligible for a spousal allowance or award. This is part of the estate that is paid to the surviving spouse for his or her support before creditors are paid.
• If a married person dies without a will, a surviving spouse will receive some share of the deceased spouse’s estate. In Illinois, this is one-half of the estate if there are descendants or all of the estate if there are no children. In some states, the surviving spouse receives everything as long as any children are children of the marriage.
• In addition, if a married person dies without a will, his or her surviving spouse is typically the person with the highest eligibility or priority to serve as administrator of the deceased spouse’s estate.
• If a married person cannot make medical decisions and hasn’t executed a power of attorney, his or her spouse typically has very high priority to act as the patient-spouse’s healthcare surrogate and make medical decisions for him or her.
• Similarly, if a married person becomes incapacitated and has not executed powers of attorney, his or her spouse will normally have very high priority to be named as the disabled spouse’s guardian of the person and estate.

None of these preferences necessarily extend to unmarried couples. Certainly, in Illinois, if an unmarried partner dies without a will, the surviving partner will not receive any portion of the deceased partner’s estate. There will be no spousal allowance, and the surviving partner has no priority to act as executor or administrator of the deceased spouse’s estate. If one partner has a child who has not been adopted by the other partner, a court may or may not appoint the surviving partner as guardian.

If there is a disability, a person who legally has no relationship to the disabled partner may have low priority to make healthcare decisions and to serve as guardian to protect the disabled partner.

Cohabitation is Common, Cohabitation Agreements Less So

Cohabitation is increasingly considered a normal part of family life.

According to the US Census, 15% of young adults aged 25-34 live with an unmarried partner. In 1968, only 0.2% of Americans of the same age were living with an unmarried partner. If cohabitation is the new normal, it is crucial for people in this demographic to protect their partners and families by preparing their own estate plans.

So, how can romantic partners navigate the lack of property rights for unmarried couples? Cohabitation agreements are legal contracts (or implied agreements, which are much trickier) between live-in partners that establish the division or distribution of property, ongoing financial support, child custody and visitation rights, health care directives, and other personal matters in the event of a breakup or death. In many cases, this includes a will and powers of attorney.

In happier times, the couple from the Blumenthal case could participate in mutually beneficial estate planning. A partner could make a will naming his or her partner as beneficiary and as executor of the estate. Such a legal document could also nominate the partner as guardian of a child. The powers of attorney would name the partner to make medical and property decisions in the event of incapacity. Having a will and powers of attorney can confer on unmarried partners the protections and advantages that the law automatically gives to married people.

[Editor’s Note: To learn more about this and related topics, you may want to attend the following webinars: The Legal & Tax Aspect of Investing: Asset Protection, Estate Planning and Tax Efficiency and Estate Planning & Asset Protection – 101. This is an updated version of an article that was originally published on October 20, 2016.]