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Financial planning for unmarried couples:
Protect those assets

Whether straight or gay, people who have decided to build a life together but either can't or don't want to get married need to be especially diligent when it comes to financial planning.

"Planning" is the operative word. You have assets and, perhaps, you'll acquire more. You should protect those assets. You should also make sure your wishes are carried through if you become incapacitated or die. Unless you take steps now to ensure your financial future, you could run into a wall of trouble that will take a sizable chunk of your assets in either attorney fees or taxes to untangle.

The first rule of thumb is talk to a professional -- a credentialed financial adviser or an estate attorney. Maybe both. This isn't the time to cut corners to save money. Laws can vary from state to state, and individual companies can vary greatly in what benefits they allow an unmarried partner to share.

Registering your relationship
Financial planning can be complicated for anyone, single or married. But married people have that little piece of paper that, in essence, says one spouse is the legal heir of the other even if there's no will. As an unmarried couple, you'll need a lot of documentation to make up for the lack of a marriage certificate.

"The fastest way to leave money to somebody is to jointly register assets -- home, cars, bank accounts and investment accounts," says certified financial planner Sean Cherry of Financial Asset Management in Palm Beach Gardens, Fla.

Of course, not all couples will want to jointly register assets. If one person brings a house into the relationship, he or she may want to keep it solely in his or her name. Keep in mind that more than 50 percent of couples break up. You need to do what makes you comfortable. Your financial planner will work it out.

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"For one couple I had to run three separate plans -- one for one partner, one for the other -- they had separate incomes, separate benefits and their tax projections were different. And I had to develop another plan combining their assets, income and living expenses," says CFP Diane Maloney of Beacon Financial Planning Services in Plainfield, Il. "They now intend to hold some assets jointly -- merge their retirement benefits."

That's important, Cherry says. "A key here is retirement plans and insurance policies. Many people don't take advantage of designating beneficiaries -- primary and contingent. This is how you maintain very strict control over your assets. They can contest a will, but if you've designated in your retirement and insurance plans, 'This is my beneficiary,' then it really isn't contestable."

Of course, sometimes it may not be possible to have a plan set up exactly the way you want. "Robert," one of Maloney's clients, was a state employee. He'd like to let his partner share in his health and retirement benefits, but he says the state won't allow it.

"Probably the most unfortunate thing has been that he can't use my health insurance," Robert says. "We're not allowed to put a partner as the beneficiary. Also, I will receive my retirement until I die, but it ends with my death and nothing can be picked up by him."

Are your assets up for grabs?
Another issue you'll want to address is writing a will or a trust. It's just plain foolish not to have one or the other. People who die without a trust, a will or a legal spouse are pretty much just putting their assets up for grabs -- by the state and just about anyone else.

Lisa Hauser, an estate attorney with Comiter & Singer in Palm Beach Gardens, Fla., says you may want to set up a trust if you're getting older and worried about becoming incapacitated.

"You want to avoid having your assets subjected to a guardianship proceeding," says Hauser. "In a trust you can name the people who will be the trustees. You can name 20 successor trustees, whereas in a guardianship you don't know who the judge will appoint. There are forms to designate someone as guardian, but there's no guarantee the judge will appoint that person.

"Plus, people may try to contest it. People can contest your appointment in a trust, but it's more difficult. With a guardianship you're always under court supervision -- how the money is spent -- tons of paperwork."

Another reason to opt for a trust over a will, according to Hauser, is privacy.

"If your assets are in your name as opposed to in a trust, there will have to be a probate proceeding when you die. That becomes part of the public record. In a trust only the income beneficiaries have a right to know the assets. Another reason to have a trust is probate involves hiring an attorney, paying an hourly fee plus filing fees."

Hauser says there's no great tax benefit to setting up a trust. An attorney can do the same tax planning in a will.

Power of attorney
Power of attorney is critical. It's just as important during your life in case you become incapacitated as it is after your life.

Maloney says you'll want two separate documents -- one for health care and one for property.

"If it's your intention for your companion to make decisions regarding health care, then that absolutely needs to be stated because family members may not have as clear an understanding as to what your intentions are and they'd ordinarily have the primary right."

Again, your financial planner will help you navigate state laws. In Florida, for example, says Sean Cherry, a document called the "health care surrogate" is needed.

"That allows you to make decisions in a hospital just as a legal spouse would. You also should have a living will. In that you clearly state to medical authorities whether you wish to have life-sustaining care."

The power of attorney for property will let you make financial decisions, Cherry says.

"Just as the health care surrogate document lets you make decisions in the hospital, the power of attorney allows you to do so everywhere else -- banks, investment firms. If your partner doesn't have you on his or her checking account and you need money for some of those medical bills, the power of attorney allows you to do that. It's about liquidity -- not being stuck for funds when you need them."

If you and your partner are considering talking to a financial adviser, call several firms in your area and ask if they have someone with substantial experience in assisting unmarried couples. Be sure to check the adviser's credentials.

"I'm finding an increasing number of unmarried couples," says Cherry. "I don't even notice any more. These issues are important whether people are gay or straight. I used to think it just applied to gay couples. Now that's not true. I have as many straight and unmarried couples as gay couples. People are terrible about taking care of these things. If I had a lot of money, I'd run a foundation teaching this in our school systems. Money is wasted. It's every day, it's everybody."

Don't be uncomfortable about discussing these issues. No one likes talking about illness, death, or breaking up and who gets the money. It's important that your assets be protected and that your wishes are carried out.

-- Posted: March 13, 2001

 

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See Also

Financial planners -- check them out before handing them your money

Securing your stash
Splurge or save as you approach retirement?
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