What Happens When Unmarried Couples Don’t Have Wills?

There can be serious problems when people live together without the benefit of marriage. One is that they don’t have any legal right to make medical decisions for each other. Another is that without any will or estate plan in place, the surviving spouse has no legal right to any of the decedent’s property. That’s just for starters, explains the article “Longtime unmarried couple hasn’t planned for future” from the Santa Cruz Sentinel.

The couple may be pleased with their decision to live on their own terms.  However, by refusing to plan for the inevitable, they are creating an unnecessary difficulty for their loved ones. The children and grandchildren of the couple are likely going to end up having to sort out the mess, after one of the couple dies. They may end up in court, battling over the house or other assets.

If the couple wants their property to end up in the hands of their children when they pass away, having no estate plan is not the way to make that happen. When one spouse dies, any assets they own in joint tenancy will go to the surviving partner. When the surviving partner passes, those assets will go to their children, and nothing will be passed to the other family.

The surviving partner will have no legal right to the assets of the deceased partner, other than any that have been titled to joint tenancy. There is no community property between cohabitating couples, unless they have registered as domestic partners. This is how the law works in California, and every state has its own rules. Assets owned by the deceased partner that are titled in his or her name only, belong to the decedent’s probate estate and will pass to their children. If the gentleman dies first, in this example, will his companion be left homeless?

This is a situation that can be easily remedied with an estate plan, creating wills and trusts that clearly spell out how they want their assets to be distributed upon death. There are many different ways to make this happen, but they will need to work with an estate planning attorney. Where the surviving non-homeowner will live after the homeowner dies is a serious issue, unless other plans have been made. One way to do this is to leave a life estate in the home in his will, or by creating a trust that holds the home for her use. When she dies, the home can then pass to his children. In that case, a series of agreements about how the home will be maintained may need to be created.

Taking the time and making the investment in an estate plan, is for the benefit of the individual and the family. An indifferent attitude about the future is hurtful to those who are left behind.

Reference: Santa Cruz Sentinel (April 7, 2019) “Longtime unmarried couple hasn’t planned for future”

Suggested Key Terms: Unmarried, Wills, Life Estate, Trusts, Probate, Asset Distribution

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What to Do 10 Years Before Retirement

Many people go through their entire careers, assuming they will be ready to retire when they hit “that age,” whether your concept of a retirement age is at 62, 65, 67, 70, or later. People think that if they worked hard, paid into Social Security, and saved up some money in an individual retirement account (IRA) or 401(K), they will have the money they need when they stop working.

If you are in your 50s, you should be doing the math to make sure you will not have to survive on ramen noodles and peanut butter in your golden years. Here are some suggestions about what to do 10 years before retirement.

Give Your Finances a Quick Checkup

You would not take a road trip across the United States, by just getting into the car and driving around aimlessly. You can’t assume that if you drive for 3,000 miles, you will happen to end up in California from the East Coast. You have to think about where you are now, where you want to end up and what you need to do the get there.

The standard advice is that, by the time your retirement is 10 years away, you should have saved about seven times your current salary. This rule of thumb is part of the general idea that people should save 10 times their annual salary by the time they retire. In reality, the amount you will need is not that simple.

How Much Money You Really Need to Retire?

The amount you will need, depends on many factors, such as the living expenses you will have in retirement. Your retirement living expenses will vary widely, because of factors like these:

  • Whether you will be getting a Social Security retirement check, and how much that check will be. Many Americans will not qualify for Social Security when they hit retirement age, or they will get a much smaller check than they thought they would. Go to the Social Security Administration’s website and use their calculator, so you can find out what to expect.
  • Whether you have a private or government pension. Unfortunately, pensions are not as common as they used to be, but you should check to see if you qualify for one.
  • Whether you will have a mortgage or rent payment. If you have paid off your mortgage or will sell your house and use the proceeds to buy a smaller place with no mortgage, then you will not have one of the highest living expenses of retirement, which is housing. Experts say that people who do not own a mortgage-free home in retirement have to plan on paying $1,500 a month for housing for the rest of their lives, or until they do pay off their mortgage.
  • Whether you will have any debt, like credit cards, car payments, educational loans or personal loans during retirement.
  • The cost of living where you plan to retire. If you live in a small town that has a low cost of living, you need far less money that someone who lives in Manhattan, San Diego or another expensive city.

Steps to Take Now to Make Your Retirement More Secure

Boost your credit score. This will decrease the cost of borrowing money, which can lower your living expenses.

Pay down and then zero balance as many debts as you can, before you stop working. Some people work for another year or two to pay off their debts and have less financial stress in retirement.

Think about part-time or freelance work you could do when you retire, or a business you might want to start. Take the steps now that will put you in a favorable position to enter your next adventure, when you stop working.

References:

AARP. “Countdown to Retirement: 10 Years.” (accessed March 23, 2019) https://www.aarp.org/retirement/planning-for-retirement/info-2019/10-year-countdown.html

Suggested Key Terms: the last 10 years before retirement, what to do ten years before you retire

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Do My Debts Die with Me?

When you die, your debts do not. Your executor will be required to pay them using your assets. That means that any unpaid debt can reduce the wealth you’ve left behind for your heirs. In some cases, your family members could even need to pay your debt.

Reader’s Digest’s recent article, “This Is What Happens to Your Debt When You Die,” explains that not all debt is created equal. With secured debt, like a mortgage or car loans, your estate can either pay off your debts in full or continue making installment payments. Another option is to sell the property or turn it over to the lender to satisfy the debt.

However, any unsecured debt, such as credit cards, bills, or personal loans, is typically just paid from the estate. The estate is everything you own, such as assets, bank accounts, real estate and other property.

Note that student loans are the exception, but there are some caveats. Most federal student loans, along with private loans without a cosigner, are discharged with proof of death. Thus, your heirs won’t be responsible for those loans. However, if your private student loan was cosigned, that person will be required to pay it off. There are also some loans, like PLUS loans, that while technically forgiven, could leave the parent who took it out with higher taxes.

The way to protect both yourself and your family, is to speak with an experienced estate planning attorney to get your affairs in order.

Creating an action plan for your outstanding debt is a critical component of the estate planning process. You also need to ask about other end-of-life plans, like medical directives, wills and trusts to manage your assets, when you pass away.

You should also review your life insurance policy to make certain that it’s up-to-date, and don’t forget to review your named beneficiaries.

If your beneficiaries are assigned correctly, some of your assets may bypass probate and be protected from creditors. Therefore, anyone who’s listed on your policy won’t be forced to hand over their money to satisfy your debt.

Reference: Reader’s Digest “This Is What Happens to Your Debt When You Die”

Suggested Key Terms: Estate Planning Lawyer, Wills, Life Insurance, Trusts, Probate Court, Inheritance, Healthcare Directive, Financial Planning

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