Long-term and life partnerships sans a marriage certificate (unmarried couples) are gaining steam, especially in younger generations. The dynamics of these partnerships may be just about the same as married couples (shared finances, cohabitation, etc.), but the law has not evolved at the pace societal norms have. Life partners are often the best person to manage affairs for us when we become unable to, so it makes sense why a question frequently asked by unmarried couples is whether it makes sense to create a trust for their partner.
Not only does it make sense, but it is essential. When you create a trust for your partner, you ensure that they have a legal right to benefit from your estate when you pass. What’s more, if a partner becomes incapacitated, it is vital that the partner designates who will manage their affairs when they cannot.
Yes—and for the same reasons married couples do
Married and unmarried couples alike are faced with the same concerns when estate planning, but unmarried couples find themselves in a unique predicament. Unmarried couples are not afforded the same protections and benefits as married couples regarding the distribution of their assets. This occurs because married couples have default rules codified in the law, which designates who has what rights when the other partner becomes incapacitated or passes.
Suppose you and your partner’s relationship has created a blended family. In such a scenario, a trust gives you the flexibility to provide for your partner after you pass without leaving any children (if any) out. For example, you may wish to support your partner with income they are entitled to during their lifetime. Once your partner passes, alternate beneficiaries can benefit from the trust income.
Protection from Creditors
Some will instinctively think about adding their unmarried partner as a joint property owner as an easy way to give their partner control over assets automatically. It’s true, they will have control and access immediately, but this is not without any pitfalls. For example, when assets are owned jointly and one partner passes, the other is left as the sole owner. In this scenario, the living partner has full discretion on what to do with that property, notwithstanding that you may have wished or intended otherwise.
Another pitfall is when the living partner’s creditors come after property that your partner is now the sole owner of. When your assets are instead placed in a trust, and some safety mechanisms built into the document, creditors cannot look to assets that do not legally belong to your partner to satisfy a judgment.
Another consideration is a partner’s long-term care options. If your partner has limited assets and income themselves, they may consider applying for Medicaid Long-Term Care (“Medicaid LTC”) benefits if they need long-term care. To get approved for Medicaid LTC, your partner’s assets must be below a certain amount. Married couples cannot use a revocable trust to place income and assets in to spend down their wealth in order to qualify for Medicaid LTC. On the other hand, unmarried partners are not subject to the same level of scrutiny, and your trust property cannot be a means of disqualifying your partner from benefits.
A Trust is an Out-of-court Mechanism to Manage Affairs
A trust is important in ensuring that your assets and your affairs are managed according to your wishes if you become unable to manage either yourself. You should be sure to outline your wishes now to save your family the headache of ironing out key issues through a costly and time-consuming court challenge.
Attend a Free Estate Planning Webinar
The world of estate planning doesn’t have to be a mystery. Commissioning the help of an experienced estate planning attorney can make all the difference in making sure your partner benefits from your estate in the future. Therefore, we invite you to attend one of our informative and interactive estate planning workshops to learn more. Just by attending you will be entitled to a complimentary consultation with Promise Law.