More Americans are not marrying, although some couples choose to live their lives together and remain unmarried. The decision to not marry can have some surprising, unexpected outcomes with regard to estate planning and inheritance considerations.
Here are a few specific things to keep in mind if you and your partner are not married:
Spousal share of an intestate estate: If a married individual without any children passes away without a will, the surviving spouse will receive 100% of the net estate. If the same individual was not married, the individual’s parents will inherit 100% of the net estate.
Social Security survivorship benefits: If a married individual passes away, a surviving spouse (and in some cases, a divorced spouse) will be entitled to claim widower’s benefits.
Required spousal beneficiary designations: A federal law, the Employee Retirement Income Security Act (ERISA), governs most pensions and retirement accounts. Under ERISA, if the owner of a retirement account is married when he or she dies, his or her spouse is automatically entitled to receive 50 percent of the money, regardless of what the beneficiary designation says.
Priority in nomination of fiduciary roles: Spouses generally receive priority, in the absence of a designation, in nomination of a personal representative, conservator, and health care representative. An unmarried individual has a real incentive to properly making his or her wishes known, if a partner is to act as a point person in the event of a death or emergency.
Rights to an inheritance: In Oregon, if a married individual creates a will and disinherits the surviving spouse, the surviving spouse can successfully fight this. In essence, Oregon law protects a surviving spouse from being disinherited by a spouse.
If a couple has been married for 15 years or more, the surviving spouse is entitled to 33% of the augmented estate. If the couple has been married for less than 2 years, the surviving spouse is entitled to 5% of the augmented estate. Of course, these are just simplified examples; if your spouse has already passed away and you were married, please seek legal advice as to your particular situation.
Death tax considerations: If a married individual passes away and leaves everything to the surviving spouse, a marital deduction will be taken on the assets passing to the surviving spouse. Therefore, no death tax will be due on the first spouse’s death. Also, the federal unified credit against estate taxes is portable between spouses.
Gift tax considerations: Under the Internal Revenue Code, spouses who are both US citizens may elect to report gifts made by them during the calendar year as made one-half by each spouse. This allows a married individual to be able to gift $28,000 annually without paying any gift tax, rather than $14,000 annually.
Because the laws provide many protections and benefits to married couples, it is even more important for unmarried couples to have an estate plan that implements their wishes at death.
As always, this article is intended as a brief introduction to the legal rights of married individuals with regard to estate planning. It is expected that each individual will have unique life circumstances. As such, each person should seek proper legal advice to address his or her needs.