By some estimates, the marriage rate in the United States has plummeted 60% in the last 50 years, with younger generations much less likely to value marriage than older ones. There may be many reasons for this shift, including the fact that living together without getting married has become much more socially acceptable than it was a half-century ago. But cohabiting couples may be overlooking something very important: the importance of estate planning for unmarried couples.
Many unmarried couples view marriage as an antiquated institution—just a piece of paper. It’s true that society has become much more accepting of couples living together, and even raising families together, without getting married. But the reality is that that “piece for paper” provides a host of financial and legal benefits for couples.
How Marriage Makes a Difference, Legally and Financially
Individual people may not value marriage as much as in the past, but society still incentivizes marriage through laws that provide advantages to married couples. These advantages include:
In all states, including Michigan and Florida, married couples have the right to inherit from each other even in the absence of a will or other estate plan. A surviving spouse is generally entitled to most or all of a deceased spouse’s estate. By contrast, a surviving unmarried partner has no legal right to inherit from a deceased partner who died intestate.
As estate-planning attorney Danielle Mayoras noted in a recent interview with CBS News Detroit, “If you (become) disabled and something happens and you’re not married, your partner doesn’t have any rights in the probate court.” Where a probate court will typically give a spouse the right to make medical decisions for an incapacitated spouse, an unmarried partner is not considered next-of-kin and is not granted those rights.
Doubling of the Gift and Estate Tax Exemption
Taxpayers in the United States can give away a certain amount of assets during their life or through their estates after death without incurring gift or estate tax. The lifetime gift and estate tax exemption for an individual is $13.61 million dollars in 2024; for married couples, the amount is $27.22 million.
What’s more, this exemption is “portable” between spouses. If one spouse dies and doesn’t use the full amount of their available exemption, the remaining amount can be transferred to the surviving spouse, potentially shielding an even larger portion of that spouse’s estate from taxation. However, unmarried couples do not have this advantage.
Annual Gift Tax Exclusion
Taxpayers can also give an unlimited number of other individuals up to $18,000 per year (as of 2024) without having to pay or report gift tax, and without reducing their lifetime gift and estate tax exemption. Married couples can double this amount, making a joint gift of up to $36,000 to each recipient.
When a spouse who owns an Individual Retirement Account (IRA) dies, their surviving spouse has more flexible options than an unmarried partner or other non-spouse beneficiary would. One significant advantage is that a surviving spouse can roll over the deceased spouse’s IRA into their own IRA.
If the surviving spouse is younger than the age at which they must begin taking required minimum distributions (RMDs), they can leave the funds in their IRA and delay taking RMDs, which allows a longer period of tax-deferred growth for the asset. By rolling over the IRA, a surviving spouse can then designate their own beneficiaries for the asset when they die. Unmarried partners cannot roll over a partner’s IRA into their own, even if they are named as beneficiary.
Surviving spouses are also not required to withdraw all funds from the IRA within 10 years after the death of the original IRA owner, as non-spouse beneficiaries are.
Why Unmarried Couples Need an Estate Plan
If you and your partner aren’t married, you shouldn’t rush to the altar or the courthouse just to secure those advantages. But you might want to consider rushing to the office of an estate planning attorney. While creating an estate plan cannot give unmarried partners all of the rights of married couples, creating an estate plan can give partners many of those benefits, including:
The right to make medical decisions for one another by creating advance directives such as a patient advocate designation or medical power of attorney
The right to manage the other partner’s finances if they are unable to manage their own affairs, by creating a durable financial power of attorney
An estate planning attorney can also advise unmarried partners about other ways to protect their property rights, such as by creating beneficiary designations on financial accounts that allow them. In the final analysis, though, beneficiary designations and measures like joint ownership are not a substitute for an estate plan.
While no one should marry if they are not ready to do so, committed couples also shouldn’t assume that marriage has no benefits to offer them. The legal and financial benefits of marriage are frequently overlooked—and it’s time to have the conversation.
The knowledgeable estate planning attorneys at Barron, Rosenberg, Mayoras & Mayoras work with clients regarding power of attorney for college students. Schedule a consultation today by calling (248) 213-9514 in Michigan or (941) 222-2199 in Florida to learn how we can assist you. You can also use our simple online contact form.