The national debate over same-sex marriage has obscured a different trend: cohabitation. Whether Americans are gay or straight, it is more popular than ever to live together, outside of marriage. In fact, research shows that in 1930, married couples accounted for 84 percent of American households. And just 75 years later, married couples were the minority at 49.7 percent. Remarkably, the number of unmarried cohabitants increased by 88 percent between 1990 and 2007.
Unlike their married counterparts, unmarried cohabitants may not be able to make fundamental health and financial decisions for one another in the event of incapacity. Absent prior legal planning or specific statutory authority, they have no legal standing over blood relatives in a court of law.
Absent proper legal planning, the death of one cohabitant may leave the surviving cohabitant in financial distress. State intestate succession laws (i.e., state laws that determine the distribution of assets of persons who die without a will) only distribute assets to blood relatives. Thus, a cohabitant will have no legal standing to claim ownership of the decedent’s assets.
Estate Tax Challenges
Under current law, most Americans won’t face a federal gift or estate tax. Everyone gets a $5.25 million exemption, which effectively eliminates gift and estate taxes for most people. However, assets left to a surviving spouse are not subject to federal estate tax, no matter how much they are worth. This rule is called the unlimited marital deduction.
The Marital Estate Plan
Not surprisingly, very few married couples – whether they are newlyweds or celebrating sixty years of marriage – realize the importance of estate planning. However, every married couple needs some form of estate planning to protect and provide for their spouse – in sickness and in health. In this article, we review some fundamental legal tools and techniques that are essential for every married couple.
Durable Power of Attorney
Most married couples have the mistaken belief that they can make personal, health care and financial decisions for one another should either become incapacitated due to illness or injury. But in reality, nothing could be further from the truth. The law requires further and more specific written legal authority.
Wills & Trusts
Once you have made arrangements to care for each other in the event of incapacity, make arrangements for the transfer of your assets to one another upon death. These transfers may be outright or in trust. Also, do not forget to make arrangements for any eventual inheritance that may be left to your children. Sometimes it is wise to protect an inheritance both from and for your children. Inheritance trusts, whether established under a last will and testament, or under a revocable living trust, can provide considerable inheritance protection for your children from potential divorces, lawsuits or bankruptcies.
Estate Tax Challenges
Most people think they donít need to worry about the federal gift and estate tax, especially married couples. Under current law, everyone can exempt $5.25 million from federal gift and estate taxes. Additionally, married couples have an unlimited marital deduction when passing wealth from one spouse to another. They also can combine their exemptions to protect a total of $10.5 million of estate assets, under a concept called portability.
This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material.
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