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Financial Planning Issues for Unmarried Couples

by Chris Cooper, Financial Planning Expert
January 07, 2016

Question: My father and his partner are not married. Would there be any special issues they would face when it comes to financial planning?

Answer: Yes, there are specific issues where two people decide to live together and build a life together without being legally married.  First, when you marry someone (now that DOMA has been overturned, this applies to equally today and straight couples) that person becomes your #1 relative in a variety of situations, most especially in health care decision making and in estate tax planning.  In the absence of an advance directive (called a health care power of attorney in some States) the doctor and hospital will look to the spouse (the #1 relative) to make medical care decisions when the partner is unable to give consent.

There are many reasons for couples NOT to marry, as it can make for complex estate planning when both partners have children from previous relationships. Also, business issues, such as one partner needing to file bankruptcy, or are having tax problems could be good reasons.

But the biggest reason to not marry: Long Term Care and the possibility of having to qualify for public assistance under Medicaid. This is NOT thought about when couples marry or marry a second time (or a third, etc.) People assume that a pre-nuptial agreement will protect each spouses’ assets and income from being used to pay for long term care, but this is NOT the case.  Medicaid ignores pre-nuptial agreements entirely, so all assets of both spouses are available to pay for long term care. Also, you can potentially disinherit your children by marrying if you don’t do proper trust and estate planning BEFORE your get married.

If two people choose to live together and share their lives together without getting married, then they should decide before living together the following and then have an attorney draft a “domestic partnership agreement” which spells out who pays for what, and what happens if you split up or if either of you requires long term care.  Other questions that need to be answered are : 1.)  who is going to be named as a surrogate decision maker under a health care directive or health care power of attorney?  2.) Are you going to name each other agent under a durable power of attorney for financial matters or are you going to have someone else named?  3.) Are the two of you going to co-mingle any assets, such as buying real estate together, opening joint bank accounts, and others.  4.) In couples where one has financial resources and the other does not, what level of support will or will not be provided to the partner with less resources?

In many ways, be glad your father is not married, as it could make more complexity of the issues of aging.

Chris Cooper is the owner and founder of Chris Cooper & Company, Inc., a fee-only financial planning firm for elderly persons and the owner and founder of ElderCare Advocates, Inc. a private geriatric care management and long term care consulting firm. As a California Licensed Professional Fiduciary, Chris can serve as  Conservator of the Person and Estate under court appointment,  as Agent under a Durable Power of Attorney for Financial matters and Health Care matters.

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