Estate Planning is Designed to Benefit Married Couples, So What is an Unmarried Couple To Do?

octubre 7, 2015

According to the 2010 U.S. Census data, over 6.8 million opposite-sex couples and 680 thousand same-sex couples are unmarried. From that total, 40% of couples had children living with them. Our federal and state laws favor the transfer of assets by marriage and create a more complex system for unmarried couples to navigate. For this reason, it is critical that unmarried couples protect their individual interests and assets for their loved ones through proper estate planning.

Wisconsin is a marital property state. Generally, each spouse has a vested one-half interest in each item of property generated during the marriage. Certain protections are in place for spouses that are not applicable for other cohabitants. In 2009, Wisconsin put in place domestic partnership laws for same-sex partners under Wis. Stat. Chapter 770 to try and bridge some of these gaps. On October 6, 2014, same-sex marriage in Wisconsin became legal. As a result, the marital property laws and protections fully opened up for same-sex couples for federal and state purposes. For same-sex couples in Wisconsin, three options now exist: unmarried, registered domestic partnership or marriage. For opposite-sex couples, being unmarried or married are the only current options.

Below is a limited illustration that shows the differences between these three living arrangements as they relate to real estate transfers under Wisconsin law:

 

Unmarried Couple Domestic Partnership Married Couple
Homestead real estate titled in both names Unless specifically titled as a joint tenancy or otherwise addressed, survivor will only have a one-half interest in property as a tenant in common. Surviving partner will own entire property. Surviving spouse will own entire property.
Intestacy (death with no will or estate plan – probate proceeding) Deceased owner’s interest goes to surviving heirs (family lines) which does not include the survivor. To surviving partner (if children from previous relationship of deceased this could be 50/50).  Some limitations exist for personal property. To surviving spouse (if children from previous relationship of deceased, then this could be 50/50).
Adjustment in tax basis at death of first owner to die 50% of jointly-owned, real property will receive a stepped-up tax basis to fair market value at date of death. 50% of real property will receive a stepped-up tax basis to fair market value at date of death. 100% of real property will receive a stepped-up tax basis to fair market value at date of death.
Transfer of homestead during life Either owner can transfer their ownership interest in the property during their life with no consent of co-owner. Either partner can transfer their ownership interest in the property during their life with no consent from partner. Neither spouse can transfer their ownership interest in the property without the written consent of the other spouse on the deed.
Real estate transfer tax between owners Subject to transfer tax. Exempt from transfer tax. Exempt from Transfer tax.

The above chart reflects how the system is set up to address marital interests. For example, if an unmarried couple owns their home as tenants in common, a buyout mechanism needs to be in place when the first owner dies, otherwise the sale of the home may be forced on the surviving owner. Conversely, if the property is titled as a joint tenancy, the deceased partner is giving their interest to the surviving partner. Many couples are unaware that these significant decisions need to be made when they are asked how they want to title the property. Estate planning for unmarried couples is a process of customizing the wishes of the client and does not fit in with traditional estate plans for married persons. A well-thought-out estate plan should address the parameters of living together as well as a plan for providing for your partner and/or children at your death. Starting the dialogue is half the battle, and our attorneys are experienced in guiding couples through this process.

For more information about Estate Planning, contact Attorney Nancy L. Wilson at nwilson@axley.com or 262.409.2281.

Nancy Wilson
Nancy Wilson