Unmarried couples, whether same-sex or opposite sex, face difficult estate planning and tax issues. Married couples, who do not have a prenuptial agreement, are protected by the Divorce Act which basically says that property accumulated during the marriage is divided 50-50 subject to negotiation when the parties divorce. Unmarried couples do not have any statutory protection when they split up. Whoever is in title on an asset when the split up occurs will generally keep the asset unless the parting is amicable which rarely happens. The only available remedy for the party not in title is to commence chancery litigation which is expensive and uncertain. For these reasons, I strongly urge unmarried couples to enter into a cohabitation agreement which spells out who will receive what asset in the event of a split up.
From a tax standpoint, unmarried couples face a double estate tax situation—once when the first partner dies and then again when the second partner dies.
Married couples can avail themselves of the unlimited marital deduction so that no estate tax is due on the death of the first spouse and estate tax is imposed only on the death of the second spouse. Additionally, married couples may transfer unlimited amounts of assets between one another without any gift tax consequences. Unmarried couples who transfer assets between one another are subject to the gift tax rules that any other non-marital transfer is subject to.
Remember, if you are unmarried, no matter how long you and your partner are together, under the law, your partner can never become your heir. If you have not prepared wills and trusts naming your partner as a beneficiary, your heirs will typically be your family of origin to the exclusion of your partner. The same is true of powers of attorney for health care and for property. Medical providers will not listen to your partner’s directions in the case of a medical emergency without a power of attorney naming your partner as your agent to make those decisions.
I will be speaking at Center on Halsted (www.centeronhalsted.org) on November 10 on planning for unmarried couples. Please contact me directly if you are interested in attending.
Mark T. Neil & Associates
135 S. LaSalle Street, Suite 2810
Chicago, IL 60603
(312) 456-2724 (tel)
About Mark:
Mark served as law clerk to Honorable Howard C. Ryan, Chief Justice of the Illinois Supreme Court. He has significant experience representing and counseling trustees and executors through his role as Trust Counsel at Harris Trust and Savings Bank and Director of Trust Services at Cole Taylor Bank. He concentrates his practice in the areas of estate planning, probate, trust administration and business succession planning.