New American Dream Planning
The traditional sense of the American dream has changed. No longer is a happy marriage, couple kids (1.86 to be exact) and white picket fence on a tree-lined street the ideal american lifestyle. Now, statistics show that more and more people are opting to live together outside the bonds of matrimony. Individuals living together outside of marriage in the 21st century include not only young couples but senior citizens, domestic partners, and everyone else in between. Following the same California estate planning rules and principles for married couples will help to minimize potential financial disputes and complications in the event of a break-up, death or other tragedy for unmarried couples. Utilizing California estate planning rules is especially important for unmarried couples as they commonly face the same financial hardships as married couples without any the benefits of marital laws, real property rights, inheritances, employee benefits, ability to divide income and debts, and so on.
Are there special California estate planning rules that govern relationships of unmarried couples? No. The understanding of the parties is what rules the day. Talk about a recipe for future disputes. Unmarried couples in committed relationships should enter into written documents detailing what will happen to their assets (and debts) in the event that the relationship ends. This is especially true when one or both bring substantial assets into the relationship, children are involved, or a purchase of a major asset is contemplated. The first document an unmarried couple should create is called a “non-marital agreement” – otherwise known as a “living together” or “domestic partner” agreement. It’s important to note that since members of the “gay” or LGBT community can now legally marry in California, parties in those relationships are governed by the same community property rules and principles as heterosexual married couples in the absence of an agreement to the contrary.
Common Sense & California Estate Planning Rules for Non-Marital Agreements
While little guidance is contained in the California estate planning rules or state statutes, most courts recognize non-marital agreements. Common sense comes into play here. Even if you’re convinced that this is “the one,” unless your married you need to spell out how your assets and income will be divided up during a relationship and after a relationship ends. Failing to plan ahead may lead to court action at the end of your courtship. Great. Just what you want. A rendezvous with your ex at the local courthouse.
A non-exhaustive list of common issues to be addressed in a standard Non-Marital agreement include:
- Amount each party contributes to monthly bills
- Whether paychecks are to be kept separate or combined
- How ownership for assets brought into the relationship will be maintained (pooled or separate)
- Bank account designations (mutual checking account or individual accounts)
- How an inheritance by one person during the relationship is treated
- Whether employee benefits, if any, are shared
- How ownership for property acquired during the relationship is treated. Is ownership based on who actually buys it? The income each party earns? Split down the middle?
- How existing and/or future debts are handled
- How property will be divided on separation or death
- Alternative dispute resolution method to resolve future financial conflicts
Special considerations come into play when the parties purchase a major asset. In the case of real property, for instance, the parties need to determine how ownership will be titled, who pays the portion of the down payment and monthly mortgage, and how gains (if any) are split when the home is sold.
Follow Married Couples Lead
Having a non-marital agreement in place is just the start. Just like married couples, unmarried couples should have a will, trust and powers of attorney for medical and finances to avoid probate under the California estate planning rules. Those who haven’t tied the knot have even more of an incentive than “ball and chainers” to set-up estate planning documents. Why? California law isn’t on your side. A will, for example, details who gets what on your death. While married couples should have a will, state statute will distribute a married individual’s property by “intestacy” when no will is in place. Married couple’s commonly set-up docs that spell out their desire to have their assets and care of the children to go to the survivor on death. This is the default result for married couples under California estate planning rules. In the case of an unmarried couple, however, it’s unlikely that the property or custody of a mutually borne child will automatically go to the surviving partner without a will in place.