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Unmarried Couples May Face Unique Estate Planning Issues

Estate planning is an important subject for all married couples. It is also an issue though for unmarried couples in long-term relationships. If you are living with a non-spouse partner-and especially if you own property or enter into a business venture with that partner-your estate planning should provide for an orderly distribution of any assets acquired in the course of the partnership.

Married and unmarried couples are treated quite differently under the law. In California, married couples may own community property, or property acquired in the course of the marriage and jointly held by both spouses. Upon the death of one spouse, his or her estate plan may only dispose of up to 50 percent of any community property, with the remainder staying in the possession of the other spouse.

Unmarried couples cannot own community property, but they can hold property as joint owners. For example, they could co-own a home as joint tenants (or tenants in common) or open a joint bank account, but these assets are not community property. Typically, when one co-owner dies, the survivor automatically inherits the deceased partner’s interest. This can be a useful estate-planning tool, as such assets are generally not considered part of a probate estate. For example, if you and your unmarried partner open a joint checking account, you would automatically assume sole title upon your partner’s death without having to go through a formal estate.

Mixing Business and Personal Relationships

A recent case from Arizona demonstrates the complex estate planning issues facing unmarried couples. The deceased in this case was Dr. T. Marie Smith. Smith lived with her long-time boyfriend, Lee Martin Del Giorgio. They maintained joint and separate bank accounts, which they used indiscriminately to pay their expenses. The couple also held several parcels of real estate in Arizona and Canada.

In May 2009, Smith and Del Giorgio signed an agreement dividing their real estate interests. Some property was to be transferred into a trust that Smith created as part of her estate plan, with the trust benefiting Smith’s children. Smith died in June 2009, however, before all of the transfers were complete. Del Giorgio then halted one of the scheduled transfers to the trust and instead sold the property. Del Giorgio also “diverted” $100,000 intended for deposit in a joint account owned by Smith and her daughter to one controlled solely by Del Giorgio.

Smith’s son, Ronald, was named personal representative of her estate. He rescinded the May 2009 agreement between his mother and Del Giorgio. Litigation then ensued over a number of issues related to Smith’s assets. An Arizona probate court ultimately ruled against Del Giorgio. The court found the sale of the Canadian property and the diversion of the $100,000 improper and ordered him to pay damages to Smith’s estate.

Take Charge of Your Property

The Arizona probate court noted “there was no written business partnership agreement or verbal agreement” between Smith and Del Giorgio governing their various investment properties. This no doubt contributed to the confusion-and litigation-that arose after her death. Had Smith and Del Giorgio been married, the legal situation would have been quite different (Arizona, like California, is a community property state). But as it stood, their relationship as unmarried partners had no particular legal significance to their relationship as business partners.

Your own estate planning should take account of all business relationships. It’s important to review the legal status of all of your property and, where appropriate, take action to ensure that your intentions regarding the disposition of that property are carried out. Whether you plan to leave a large or small estate, your first step, as always, should be working with an experienced California estate planning attorney. Contact the Law Office of Scott C. Soady in San Diego today.

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