Introduction
If you pass away without a will, you die “intestate,” and your assets will be distributed according to your state’s intestacy laws. Intestate succession places an emphasis on spouses, children, and immediate biological family. Unfortunately, that means domestic partners are left with nothing.
On top of that, state laws also tend to restrict domestic partners from accessing financial accounts, medical records, and speaking on behalf of an incapacitated partner. The only way to avoid the heartache and hassle that comes with this predicament is to draft an estate plan that provides protection and rightful access to your domestic partner.
Fortunately, estate planning isn’t as difficult as people think. It’s always best to draft estate planning documents with the help of an attorney, and with a little advance preparation on your part it can be a fairly quick process. Here’s what you’ll need to address with your plan:
- What will happen if I become incapacitated?
- What are my funeral and burial plans?
- Who will handle my estate?
- How do I transfer assets to my partner?
- If you have children, who will serve as their guardian, and how will you provide for them?
What Will Happen if I Become Incapacitated?
If you become incapacitated, perhaps due to a serious illness or accident, your domestic partner will need the legal authority to speak and act on your behalf. Your partner will already have access to your joint financial accounts, but they may have a hard time accessing individual accounts and private medical records.
Depending on the healthcare laws in your state, hospitals and doctors may be restricted to only speaking with a patient’s spouse or immediate family (parents, siblings, adult children), leaving your partner—the person who knows you the best—without the ability to speak for you. To prepare for this possibility, you’ll need to draft a durable power of attorney (POA) that grants your partner full authority over your affairs. As an attorney-in-fact, your partner will have no problem managing your assets, paying your bills, and making important decisions with your doctors.
It’s also a good idea to draft an advance directive (sometimes referred to as a living will). An advance directive spells out your healthcare preferences for topics such as palliative care, resuscitation, artificial life support, and risky surgeries or treatments. This may seem redundant if your partner has a POA, but it’s very helpful for your doctors and your loved ones to see your preferences in writing so there are no disputes. If anything, it’ll ease the burden on your partner if they need to make an emotionally difficult decision.
What are My Funeral and Burial Plans?
You can formalize your funeral and burial plans with a letter of intent. A letter of intent is not a binding legal document, but most courts will recognize the instructions in a letter of intent if they can validate your signature. Leave the letter with your domestic partner, and consider leaving a separate copy with a friend or family member who can bring it forward in case you and your partner pass away together.
It’s always best to purchase pre-needs funeral and burial services from a cemetery or crematorium, but if your financial situation doesn’t allow that, it’s perfectly acceptable to list your wishes in the letter and indicate which assets should be used to pay for the services.
Who Will Handle My Estate?
In your will, you have the opportunity to nominate an executor or personal representative to manage your estate when you die. The executor will be responsible for probating your will, gathering your assets, settling your liabilities, and distributing the remaining assets to your beneficiaries.
It’s a good idea to nominate your partner to fulfill this role, and to nominate a backup executor who can step in if your partner is unable to do the job. If you don’t nominate an executor, or if someone successfully contests the appointment of your chosen executor, a probate judge will appoint a neutral third-party administrator instead.
Which Assets Need to Transfer to My Domestic Partner?
When you pass away, your partner will automatically take full ownership of any joint accounts and property held in joint tenancy. Your individual accounts, individually-owned property, property held as tenants in common, and personal possessions (art, jewelry, vehicles, etc.) will need to formally transfer title through probate court.
These are the assets that need to be specifically addressed in your will. If you forget to include any of these assets in your will, they will be subject to intestacy laws, and will most likely go to your parents or siblings rather than your domestic partner.
There are a handful of assets that are not subject to probate, and therefore do not need to be included in your will. These assets usually have a contractual beneficiary listed on the account, and the financial institution will transfer the assets to the beneficiary as soon as they receive a copy of your death certificate. These assets include:
- Bank and brokerage accounts with a payable-on-death or transfer-on-death beneficiary
- Retirement accounts
- Life insurance
- Trusts
The only thing you need to do to ensure proper transfer of these assets is to make sure your account documents list the right beneficiaries. If you try to include any of these assets in your will, the instructions will be nullified in probate court, and you open the possibility for someone to contest your will.
If you Have Children, Who Will Serve as Their Guardian, and How Will You Provide for Them?
If you have biological or legally adopted children, you’ll want to make sure your partner is listed in your will as the primary guardian. It’s also a good idea to list a couple of backup guardians in case your partner passes away with you.
Minors cannot own or receive property, so you’ll need to be careful with how you leave assets to care for them. As long as your partner is still living, you may want to transfer all of your assets to them so they can administer the assets to your children. If you’d like to gift assets directly to your children, or if you’d like to create a legacy fund that can pay for future costs such as higher education, a wedding, or their first home, it’s a good idea to create a trust.
Where a will offers direction for your assets, a trust creates a legal entity that can own, manage, and distribute your assets according to the terms in the trust agreement. You’ll get to appoint a trustee who can manage the assets, and you can instruct the trustee to use the trust’s assets and income to provide for your children. You can also include instructions to dissolve the trust and gift any residual assets to your children when they turn 18.
For long-term peace of mind, contact us to set up a consultation today. We look forward to helping with your will and other estate planning needs.
Call our Arizona Estate Planning team at (480)467-4325 to discuss your case today.