Unmarried couples aren’t ‘default unit’ if one dies. Why that matters
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For unmarried couples in long-term relationships, not being legal spouses can be a minor part of daily life.
However, in the event of death, being unmarried can make a big difference. Although the deceased may have wanted their partner to receive all or some of their assets, “they don’t get the automatic safety net that marriage brings,” said certified financial planner Jared Gagne, a partner wealth advisor at Claro Advisors in Boston.
“The important thing to understand is that the law does not treat you as the default entity,” Gagne said. “If a partner dies without planning, state laws generally send assets to blood relatives…not to the partner who shared the same home and life with them.”
As marriage rates fall, cohabitation becomes more accepted
Living together without being formally married has become a more common arrangement and is widely accepted: 2019 Pew Research Center survey69% of U.S. adults say it’s OK to live together, even if a couple doesn’t plan to get married.
This perspective emerged along with changes in the time people got married or got married.
Less than half, or 47%, of U.S. households – among them about 135 million — Married couples, according to the U.S. Census Bureau. This is down from about 66% in 1975, when there were more than 71 million U.S. households. The estimated average age at first marriage is now 30.8 for men and 28.4 for women, compared to 23.5 and 21.1 respectively in 1975.
Additionally, approximately 9.5 million households were headed by unmarried partners in 2024, according to the latest Census data. This compares with 61.4 million households headed by married couples.
In 2022, among older adults ages 50 and older, 4.6 million people were living single with a partner. accordingly Bowling Green State University National Center for Family and Marriage Research. This number was below 1 million in 2000.
Extension of durable powers of attorney
The first important document to put in place, long before you need it, involves ante-mortem considerations—granting each other financial and medical authority in the event one of you becomes incapacitated, says John Hixson, CFP, senior counsel FMP Wealth Advisors in Lake Charles, Louisiana. This year, the firm ranked 16th on CNBC’s Financial Advisor 100 list.
“The biggest mistake people make is to do nothing or [try to] do it too late,” Hixson said.
“Their intention is to have everything together, to take care of each other, but then someone [major] paralysis,” he said. “You can’t sign a legal document at this point.”
A durable power of attorney for healthcare allows your spouse to make medical decisions on your behalf if you are unable to do so yourself. This is different from a living will, which states your wishes should you be on life support or suffer from a terminal condition.
In the same case, you can also extend power of attorney for your finances, allowing your spouse to manage your money and access your accounts.
But Hixson said it might be worth checking to see if your financial institutions require you to fill out a particular legal form. He said some investment custodians may not recognize a power of attorney unless a specific document is officially attached to your account.
Transferring IRAs, HSAs, and life insurance
The next standard document you should have is a will, in which you state your wishes regarding who gets what. If you die without a will (this is called a death will), the courts in your state will transfer everything according to state law; This could mean assets go to the closest living family member.
However, a will alone will not necessarily cover all your bases. For example, the person listed as the beneficiary in each of your tax-advantaged retirement accounts (individual retirement accounts, 401(k) plans, and the like) will generally receive the money regardless of what your will says. The same goes for life insurance policies and annuities. Health savings accounts must also have a beneficiary listed.
“Unmarried couples should review these forms to verify that a partner’s name has been intentionally included where appropriate and that former beneficiaries, such as an ex-spouse, have been removed,” said Gagne of Claro Advisors.
If no beneficiaries are listed on these accounts, the money is generally included in your assets subject to probate; This is an often lengthy process for the court to approve your will (if you have one) after your death. Some states allow small estates will undergo a simplified probate process or exempt them from the process altogether.
Sometimes trust is appropriate
For individually owned bank and brokerage accounts, you can contact your financial institution to find out how to ensure the money goes where you want it after death. In some cases, this may be the definition of “payable on death” or “transfer on death.” Certificates of deposit or CDs may also receive this title.
If you want your spouse to inherit your house and you are the only person on the title deed, be sure to state these wishes in your will.
Alternatively, you can create a revocable living trust and place the home in the trust, as well as other assets that may be subject to probate, Hixson said. This allows you to manage your assets while you are alive and then transfer them directly to the intended beneficiary without going through probate.
You can also create a trust that “allows a surviving partner to live in the home or receive income for life while legally ensuring that remaining assets ultimately pass to your children, siblings, or other beneficiaries,” Gagne said.
Disclosure: CNBC does not receive any fee for placing financial advisory firms within our organization. Financial Advisor 100 list. Additionally, the inclusion of a firm or advisor in our ranking does not constitute an individual endorsement of any firm or advisor by CNBC.
