Yes, in fact only the provisions of a valid will or trust, or ownership interests that are either conveyable or payable on death will work for your joint estate planning because in the absence of such planning provisions, your partner will inherit nothing from you by operation of law. AND BEWARE if you establish a living trust but fail to properly fund it, the omitted assets will not be subject to the distribution provisions contained in your trust agreement and your partner could still receive nothing at the time of your death.
Typically couples will choose the home of one partner for their place of residence. In the absence of a life estate deed or placing the home in a trust with express provisions regarding the home at your death, your legal partner may have no right to use and occupy the separate property residence of the deceased partner. The trust allows for more flexibility to deal with situations if the surviving partner decides to remarry, cohabit with another in a marriage like relationship, or moves out or away for any reason, such as permanent admission to a nursing home. If you plan to let your surviving partner continue to live in the home even for a short time, then you must specifically address this matter and decide up front how responsibilities for payment of a mortgage, taxes, utilities, insurance coverage, repairs and any existing debt service commitments will be handled. And don’t forget the survivor’s use of household goods and furnishings.
Where one or both of you have children from prior marriages the trust can provide for division into a shelter trust to provide for the survivor and retain the bulk of the principle for one’s own children.
QTIP tax election is not available to partners, but a trust could be patterned in a similar way to hold assets for a non-spouse’s benefit. A cohabiting couple does not have the benefit of certain income tax treatment options. For example while your joint revocable trust will be treated as a Grantor Trust for state and federal tax services your joint trust will need to obtain an TIN (Federal Tax Identification Number). Banks and other financial assets held in the name of the trustees will need this TIN. The trustees will file annual federal and state Fiduciary Income Tax returns because the Trust has two grantors and those grantors are not married and eligible to file a joint income tax return. This kind of return that you file as trustees is basically an information return and no taxes will be payable at the trust level. Each of you will report your share of the Trust income and expenses on your personal tax returns along with any strictly personal income and taxable retirement benefits. Therefore your tax consequences will be the same as if you didn’t have the trust.
I recommend domestic partners have durable financial powers of attorney and health care powers of attorney. Unmarried life-partners are not next of kin. They have no priority and little standing in the law to be court appointed as guardians or conservators, fiduciaries in Veteran Affairs matters and as a Social Security payee.
You should also know your surviving domestic partner has no automatic right to give instructions concerning your funeral arrangements. If this is an important issue to you be sure your attorney prepares the necessary legal document(s) to give your companion authority and instructions for the disposition of your remains.
Misunderstandings and opposition from surviving adult children are not unusual. If you love and care about your partner, plan now and plan wisely.
Disclaimer: Information contained in this column is meant to be of general information on frequently asked questions concerning disability, elder law, estate planning and probate law, and does not contain specific legal advice to a client. No attorney-client relationship is created by reading this column. 12/2017