While married couples may seem to obviously need estate planning services, especially when children arrive, unmarried couples may actually need it more. It’s a pretty well known fact that when a married spouse passes away, the other will likely inherit a considerable portion of the estate, simply by virtue of the marriage. In the absence of a will, under our New York intestacy statutes found in the Estates, Powers and Trusts Law, surviving spouses are entitled to certain specific property including an assortment of cash, a vehicle, and personal property, then if there are no children, the survivor receives all remaining assets. If there are children, the spouse still receives those estate setoffs as well as $50,000 cash and half of the remainder of the estate. If the decedent named individuals or entities other than the spouse to receive property via beneficiary designations or joint title, whether inadvertently or intentionally, the surviving spouse can elect against assets other than life insurance to ensure a minimum of $50,000 or one third (1/3) of the net estate, whichever is greater.
But, what about individuals who are cohabitating but not legally married? The situation for them can become much more dire should one partner pass away without a solid estate plan in place. Unmarried couples typically keep their assets titled in indivdual name, so even if the couple lives together in a home, if the partner in title to the home dies , the other may have no legal right to the property. And it makes no difference if the survivor helped pay the mortgage, property taxes and repairs. If the decedent’s estate plan fails to address the survivor’s rights, he or she could be summarily evicted from a home of decades. Intestacy laws favor descendants and then ancestors; there is no provision for domestic partners or committed companions of any title. In our firm we have seen frail senior citizens who cared for a partner with dementia for years asked by surviving adult children to vacate property within days of their loved one’s passing. We have also seen the situation where the parents of an adult child who did not approve of their son’s lifestyle threatened to change the locks on their son’s business and life partner of years after their son died. To suffer a devastating loss and then to be treated callously by entitled survivors, sometimes without prior warning, only compounds an already difficult situation. Knowing the cruelty is often motivated by desire for the financial gain to be had from liquidation of a valuable asset is sickening. Saddest of all is that these dilemmas could be easily avoided with some proactive planning.
In order to avoid this kind of drama, it may make sense to add the other partner as an owner to real estate and other acounts, perhaps as joint tenants with rights of survivorship. It may make better sense to create a living trust to hold real estate and other individual assets to allow for continued management after the main owner passes without risk of the survivor being removed or being forced out due to lack of ability to pay carrying charges on the property. Only after a thorough vetting of wishes, family makeup, holdings of both partners and liquidity can recommendations be made.
There are potential tax implications to any planning solution. Under the new tax changes ushered in at the end of 2017 the likelihood of federal estate tax liability has lessened for most with a current per person estate, gift and generation skipping transfer tax exemption of $11,200,000, which are linked to inflation adjustments through the end of 2025. New Yorkers face a state estate tax, however, which for 2018 caps the basic exclusion amount at $5,250,000. Under the enabling state legislation the basic exclusion amount should match the federal exemption amount, whatever that may be, in 2019, but state legislators included a line in the 2014 New York changes that tied the exemption to the federal amount as of January 1, 2014, indexed for inflation, so it remains to be seen if New Yorkers will really see much more of an increased basic exclusion amount in 2019.
And don’t forget that although the federal gift tax exemption has risen to $11,200,000 this year, the annual per person gift tax exclusion is still $15,000.00, so any gift to a partner technically brings the analagous requirement to file a gift tax return for the value over $15,000.
Finally, while the focus of this piece was to highlight the need to provide for a non-marital partner, plenty of traditional reasons still remain to undertake planning: protecting minor children; preserving inheritances for minors and those with special needs; prepation of advance directives to ensure wishes are honored in the event of incapacity or disability; coordinating beneficiary designations with planning; formalizing business arrangements for business owners and investors; and safeguarding burial or cremation wishes by naming your agent for final arrangements.
Until now you may have been blissfully unaware of the concerns you and your significant other face should one of you die without protecting property rights for the other. Meeting with your estate planning lawyer is an excellent way to determine what concerns you should have and how to address them.
Lisa M. Powers, Esq. is a Partner in the Wealth Protection and Transfer practice group at Boylan Code, LLP.
To read the published article in the Daily Record, click here.