 |
A Letter of Instructions Can Spare Your Heirs Great Stress
While it is important to have an updated estate plan, there is a lot of information that your heirs should know that doesn’t necessarily fit into a will, trust or other components of an estate plan. The solution is a letter of instructions, which can provide your heirs with guidance if you die or become incapacitated.
A letter of instructions is a legally non-binding document that gives your heirs information crucial to helping them tie up your affairs. Without such a letter, it can be easy for heirs to miss important items or become overwhelmed trying to sort through all the documents you left behind. The following are some items that can be included in a letter:
•A list of people to contact when you die and a list of beneficiaries of your estate plan
•The location of important documents, such as your will, insurance policies, financial statements, deeds, and birth certificate
•A list of assets, such as bank accounts, investment accounts, insurance policies, real estate holdings, and military benefits
•Passwords and PIN numbers for online accounts
•The location of any safe deposit boxes
•A list of contact information for lawyers, financial planners, brokers, tax preparers, and insurance agents
•A list of credit card accounts and other debts
•A list of organizations that you belong to that should be notified in the event of your death (for example, professional organizations or boards)
•Instructions for a funeral or memorial service
•Instructions for distribution of sentimental personal items
•A personal message to family members
Once the letter is written, give it to your executors and trustees, or those who will be handling your affairs, not to everyone. It contains important and sensitive information. You should check it once a year to make sure it stays up-to-date.
Supplemental Needs Trusts and Planning for Disabled Children
Planning for Disabled Children
Americans are living longer than they did in years past, including those with disabilities. According to one count, 480,000 adults with mental retardation are living with parents who are 60 or older. This figure does not include adult children with other forms of disability nor those who live separately, but still depend on their parents for vital support.
When these parents can no longer care for their children due to their own disability or death, the responsibility often falls on siblings, other family members, and the community. In many cases, expenses increase dramatically when care and guidance provided by parents must instead be provided by a professional for a fee.
Planning by parents can make all the difference in the life of the child with a disability, as well as that of his or her siblings who may be left with the responsibility for caretaking (on top of their own careers and caring for their own families and, possibly, ailing parents). Any plan should include the following elements:
A Plan of Care
Where is your son going to live when he can no longer live with you? Will he move in with a sibling? Or into a group home? Who will make the decision? Who will monitor the care he receives? It’s never too soon to begin answering these questions and making sure that the living and support arrangements are in place.
In some cases, it can ease the transition for all concerned if the child moves to the new living arrangement while his parents can still help with the process. In many parts of the country, non-profit organizations and private consultants can help set up the plan, research available options, and assist in the move.
It will help everyone involved if the parents create a written statement of their wishes for their child’s care. They know him better than anyone else. They can explain what helps, what hurts, what scares their child (who, of course, is an adult), and what reassures him. When the parents are gone, their knowledge will go with them unless they pass it on.
In almost all cases where a parent will leave funds at death to a disabled child, this should be done in the form of a trust. Trusts set up for the care of a disabled child generally are called “supplemental” or “special” needs trusts, which are described in more detail below. (To go directly there, click here.)
Money should not go outright to the child, both because she may not be able to manage it properly and because receiving the funds directly may cause the child to lose public benefits, such as Supplemental Security Income (SSI) and Medicaid. Often, these programs also serve as the entry point for receiving vital community support services.
Some parents choose to avoid the complication of a trust by leaving their estates to one or more of their healthy children, relying on them to use the funds for the benefit of their disabled siblings. Except in the case of a very small estate, this is generally not a good idea. It puts the healthy child in the difficult position of having to decide how much of her money to spend on her sibling. Such funds also will be subject to claim by creditors and at risk in the event of divorce or bankruptcy. Finally, the child who receives the funds may die before the disabled child without setting these funds aside in her estate plan.
Life Insurance
Finally, a parent with a disabled child should consider buying life insurance to fund the supplemental needs trust set up for the child’s support. What may look like a substantial sum to leave in trust today may run out after several years of paying for care that the parent had previously provided. The more resources available, the better the support that can be provided the child. And if both parents are alive, the cost of “second-to-die” insurance–payable only when the second of the two parents passes away–can be surprisingly low.
The good news is that advance planning for a disabled child can make a significant difference in his life. You just have to take the first step.
Supplemental Needs Trusts
Supplemental needs trusts (also known as “special needs” trusts) allow a disabled beneficiary to receive gifts, lawsuit settlements, or other funds and yet not lose her eligibility for certain government programs. Such trusts are drafted so that the funds will not be considered to belong to the beneficiary in determining her eligibility for public benefits. As their name implies, supplemental needs trusts are designed not to provide basic support, but instead to pay for comforts and luxuries that are not available from public assistance. These trusts typically pay for things like education, recreation, counseling, and medical attention beyond the simple necessities of life. (However, the trustee can use trust funds for food, clothing and shelter if the trustee decides doing so is in the beneficiary’s best interest despite a possible loss or reduction in public assistance.)
Very often, supplemental needs trusts are created by a parent or other family member for a disabled child (even though the child may be an adult by the time the trust is created or funded). Such trusts also may be set up in a will as a way for an individual to leave assets to a disabled relative. In addition, the disabled individual can often create the trust himself, depending on the program for which he or she seeks benefits. These “self-settled” trusts are frequently established by individuals who become disabled as the result of an accident or medical malpractice and later receive the proceeds of a personal injury award or settlement.
Each public benefits program has restrictions that the supplemental needs trust must comply with in order not to jeopardize the beneficiary’s continued eligibility for public benefits. Both Medicaid and SSI are quite restrictive, making it difficult for a beneficiary to create a trust for his or her own benefit and still retain eligibility for Medicaid benefits. But both programs allow two “safe harbors” permitting the creation of supplemental needs trusts with a beneficiary’s own money if the trust meets certain requirements.
The first of these is called a “payback” or “(d)(4)(A)” trust, referring to the authorizing statute. “Payback” trusts are created with the assets of a disabled individual under age 65 and are established by his or her parent, grandparent or legal guardian or by a court. They also must provide that at the beneficiary’s death any remaining trust funds will first be used to reimburse the state for Medicaid paid on the beneficiary’s behalf.
Medicaid and SSI law also permits “(d)(4)(C)” or “pooled trusts.” Such trusts pool the resources of many disabled beneficiaries, and those resources are managed by a non-profit association. Unlike individual disability trusts, which may be created only for those under age 65, pooled trusts may be for beneficiaries of any age and may be created by the beneficiary herself. In addition, at the beneficiary’s death the state does not have to be repaid for its Medicaid expenses on her behalf as long as the funds are retained in the trust for the benefit of other disabled beneficiaries. (At least, that’s what the federal law says; some states require reimbursement under all circumstances.) Although a pooled trust is an option for a disabled individual over age 65 who is receiving Medicaid or SSI, those over age 65 who make transfers to the trust will incur a transfer penalty. (See Medicaid: The Transfer Penalty.)
Income paid from a supplemental needs trust to a beneficiary is another issue, particularly with regard to SSI benefits. In the case of SSI, the trust beneficiary would lose a dollar of SSI benefits for every dollar paid to him directly. In addition, payments by the trust to the beneficiary for food, clothing or housing are considered “in kind” income and, again, the SSI benefit will be cut by one dollar for every dollar of value of such “in kind” income. Some attorneys draft the trusts to limit the trustee’s discretion to make such payments. Others do not limit the trustee’s discretion, but instead counsel the trustee on how the trust funds may be spent, permitting more flexibility for unforeseen events or changes in circumstances in the future. The difference has to do with philosophy, the situation of the client, and the amount of money in the trust.
Choosing a trustee is also an important issue in supplemental needs trusts. Most people do not have the expertise to manage a trust. An alternative is retaining the services of a professional trustee. For those who may be uncomfortable with the idea of an outsider managing a loved one’s affairs, it is possible to simultaneously appoint a trust “protector,” who has the powers to review accounts and to hire and fire trustees, and a trust “advisor,” who instructs the trustee on the beneficiary’s needs. However, if the trust fund is small, a professional trustee may not be interested. This can be an argument for pooled trusts.
The New American Christmas
I received this message from my good friend, Ray Wilson:
As the holidays approach, the giant Asian factories are kicking into high gear to provide Americans with monstrous piles of cheaply produced goods — merchandise that has been produced at the expense of American labor. This year will be different. This year Americans will give the gift of genuine concern for other Americans. There is no longer an excuse . . . that, at gift giving time, nothing can be found that is produced by American hands. Yes there is!
It’s time to think outside the box. Who says a gift needs to fit in a shirt box, wrapped in Chinese produced wrapping paper?
Everyone — yes EVERYONE gets their hair cut. How about gift certificates from your local American hair salon or barber?
Gym membership? It’s appropriate for all ages who are thinking about some
health improvement.
Who wouldn’t appreciate getting their car detailed? Small, American owned
detail shops and car washes would love to sell you a gift certificate or a book of gift certificates.
Are you one of those extravagant givers who think nothing of plonking down
the Benjamins on a Chinese made flat-screen? Perhaps that grateful gift receiver would like his driveway sealed, or lawn mowed for the summer, or
driveway plowed all winter, or games at the local golf course.
There are a bazillion owner-run restaurants — all offering gift certificates. And, if your intended isn’t the fancy eatery sort, what about a half dozen breakfasts at the local breakfast joint. Remember, folks this isn’t about big National chains — this is about supporting your home town Americans with their financial lives on the line to keep their doors open.
How many people couldn’t use an oil change for their car, truck or motorcycle, done at a shop run by the American working guy?
Thinking about a heartfelt gift for mom? Mom would LOVE the services of a
local cleaning lady for a day.
My computer could use a tune-up, and I KNOW I can find some young guy who is struggling to get his repair business up and running.
OK, you were looking for something more personal. Local crafts people spin
their own wool and knit them into scarves. They make jewelry, and pottery
and beautiful wooden boxes.
Plan your holiday outings at local, owner operated restaurants and leave
your server a nice tip. And, how about going out to see a play or ballet at
your hometown theatre.
Musicians need love too, so find a venue showcasing local bands.
Honestly, do you REALLY need to buy another ten thousand Chinese lights for
the house? When you buy a five dollar string of light, about fifty cents stays in the community. If you have those kinds of bucks to burn, leave the mailman, trash guy or babysitter a nice BIG tip.
You see, Christmas is no longer about draining American pockets so that
China can build another glittering city. Christmas is now about caring about
US, encouraging American small businesses to keep plugging away to follow
their dreams. And, when we care about other Americans, we care about our
communities, and the benefits come back to us in ways we couldn’t imagine.
THIS is the new American Christmas. Spread the Christmas cheer.
Medicare’s Open Enrollment Season Already Underway
This year’s holiday shopping season has begun early for Medicare beneficiaries: the program’s Open Enrollment Period, during which you can enroll in or switch plans, began October 15 and ends on December 7.
During this period, you may enroll in a Medicare Part D (prescription drug) plan or, if you currently have a plan, you may change plans. In addition, during the seven-week period you can return to traditional Medicare (Parts A and B) from a Medicare Advantage (Part C, managed care) plan, enroll in a Medicare Advantage plan, or change Advantage plans. Beneficiaries can go to www.medicare.gov or call 1-800-MEDICARE to make changes in their Medicare prescription drug and health plan coverage.
Even beneficiaries who were satisfied with their plan in 2011 need to review their options for 2012, particularly because things are still in flux due to changes brought on by the health care law. Prescription drug plans can change their premiums, deductibles, the list of drugs they cover, and their plan rules for covered drugs, exceptions and appeals. Medicare Advantage plans can change their benefit package and as well as their provider network.
According to the federal Centers for Medicare and Medicaid Services (CMS), Medicare Advantage premiums are expected to decrease by an average of 4 percent next year from this year, while Part D plan premiums will likely increase about 2 percent to $30 a month, on average.
“There’s no doubt that a lot of seniors are in the wrong plan,” Ross Blair, the CEO of PlanPrescriber.com, a site that compares Medicare plans, told SmartMoney. “A lot of them could save hundreds of dollars a year by switching.”
Reaching for the Stars
One change beneficiaries using the Medicare Plan Finder will notice this year is CMS’s enhanced five-star rating system. Plans that have achieved a five-star rating from CMS are identified with a “gold star” icon. Those that have received a low overall quality rating for the past three years are identified with a “warning signal” icon. Another new innovation is that there is no time limit to switch into a five-star Advantage or prescription drug plan. Medicare beneficiaries have one opportunity to switch to one of these top-rated plans anytime during 2012. (For more on the significance of the star rating system, see “Medicare Plans See Dollars in the Stars.”)
If you want out of your Advantage plan after December 7, you can “disenroll” between January 1 and February 14. At that point you can return to traditional Medicare and add a Part D plan, or move into a five-star Advantage plan. But if you return to traditional Medicare you may not be able to buy Medigap coverage at that point, although the rules vary by state.
If you take no action, you will remain in your current plan unless your Medicare Advantage or drug plan is terminating its Medicare contract. Also, if you receive the Low-Income Subsidy (LIS) to help pay for some or most of your Part D drug costs, you may be randomly reassigned to a different plan. (For more on the LIS program, also known as “Extra Help,” click here.)
Some factors to consider when evaluating your drug plan include:
•What is the monthly premium?
•Does the plan continue to cover necessary drugs?
•Does the plan provide coverage for drugs in the “doughnut hole” or coverage gap?
•What pharmacies are covered under the plan?
Some factors to consider when comparing Medicare Advantage plans include:
•What is the monthly premium?
•What is the cost-sharing for doctor visits?
•Which doctors and hospitals are covered?
•Is prescription drug coverage included?
•Are any other extra benefits included and will they be useful to you?
(For a MarketWatch article on picking an Advantage plan, click here.).
Remember that fraud perpetrators will inevitably use the Open Enrollment Period to try to gain access to individuals’ personal financial information. Medicare beneficiaries should never give their personal information out to anyone making unsolicited phone calls selling Medicare-related products or services or showing up on their doorstep uninvited. If you think you’ve been a victim of fraud or identity theft, contact Medicare. For more information on Medicare fraud, click here or here.
Here are more resources for navigating the Open Enrollment Period:
•The 2012 Medicare & You handbook, which all Medicare beneficiaries should have received. The handbook can also be downloaded online at: www.medicare.gov/publications/pubs/pdf/10050.pdf
•The Medicare Rights Center: www.medicareinteractive.org
•Your State Health Insurance Assistance Program, which offers independent counseling: https://shipnpr.shiptalk.org/
•Kiplinger’s “How to Compare Medicare Advantage Plans”
•Medicare Plan Finder: www.medicare.gov/find-a-plan
•U.S. News on “Understanding Your 2012 Medicare Enrollment Statements”
For more about Medicare, click here.
President’s Deficit Plan Still Means Sacrifice for Elderly and Disabled
As part of his opening move in negotiations to reduce the federal deficit, President Obama has proposed $320 billion in cuts to Medicare and Medicaid. Although the Medicare and Medicaid programs would be spared the kind of radical surgery prescribed by Republicans, the President’s proposal would result in higher costs for some Medicare beneficiaries, and advocates warn that proposed cuts to health care providers and states will end up indirectly eroding care for the beneficiaries of both programs.
The deficit reduction pact agreed to by Congress calls for a 12-member Congressional “super committee” — six members from each party – to come up with between $1.2 and $1.5 trillion in budget savings or face mandatory budget cuts, mostly to health care providers.
The Obama plan, which would reduce Medicare spending by $248 billion and Medicaid by $72 billion over 10 years, derives a large amount of its Medicare savings by requiring drug companies to give that program the same rebates the companies currently accord Medicaid, yielding a projected $135 billion over 10 years starting in 2013. Unless you’re a drug company executive, this change is fairly non-controversial.
But the same cannot be said of a big chunk of Medicaid savings in Mr. Obama’s plan, which would come from changing how the federal government shares Medicaid costs with the states. Currently, the federal government pays states a different rate for different populations, such as children or seniors, because some populations are costlier to cover than others. President Obama is proposing that the federal government switch to so-called “blended rate,” in which states would receive the same rate for all their Medicaid patients, resulting in anticipated savings to the federal government of $14.9 billion over 10 years.
The President first proposed the change during negotiations over raising the debt ceiling this past summer. At the time, the Center on Budget and Policy Priorities predicted that the adjustment will shift significant Medicaid costs to the states because the new blended rate would be set at a level that provides a state with less federal funding than it currently receives. In addition, a fair and accurate blended rate for each state would be very difficult or impossible to calculate, the Center claimed.
States desperate to make up for the reduction in federal Medicaid funding would likely turn first to reducing services to the elderly and disabled because that’s where the money is.
“The Medicaid cuts in the president’s proposal shift the burden to states and ultimately onto the shoulders of seniors, people with disabilities and low-income families who depend on the program as their lifeline,” says Ronald F. Pollack, executive director of the consumer group Families USA, of the new deficit plan.
Matt D. Salo, executive director of the National Association of Medicaid Directors, which represents state Medicaid officials, says, “You would have a hard time cutting significant amounts from Medicaid payments to states without hurting beneficiaries.”
At the same time that states could have fewer Medicaid dollars to spend on care for the elderly and disabled, the Obama plan would cut $42 billion over 10 years in payments to nursing homes, long-term care hospitals, rehabilitation facilities and home health facilities. The nursing home industry says this will diminish its members’ ability to properly care for elderly and disabled patients.
The President’s proposal would also place new, direct costs on certain Medicare beneficiaries, future retirees in particular. The plan would:
•Require beneficiaries of home health services to pay a $100 co-payment per treatment episode starting in 2017. Revenue raised: $400 million over 10 years.
•Increase the deductible for Medicare Part B (physician services) by $25 in 2017, 2019 and 2021 for new beneficiaries. Revenue raised: $1 billion over the next decade.
•Impose a 15 percent surcharge on Medigap policies, which pay for out-of-pocket costs in Medicare, starting in 2017. Revenue raised: $2.5 billion over 10 years.
•Hike premiums for higher-income Medicare beneficiaries on Medicare Part B and Medicare prescription drug plans. Revenue raised: $20 billion over 10 years.
•Fix a glitch in the health reform law allowing some middle-class early retirees to get Medicaid. Savings: $14.6 billion over 10 years. (Details here.)
At a rally sponsored by more than 90 national advocacy groups — including AARP and the American Association of People with Disabilities — hundreds of disability-rights advocates congregated at the Capitol on September 21 to protest the proposed Medicaid cuts.
In announcing his deficit reduction plan, which aims to cut the debt by a total of $3 trillion, President Obama promised that he would veto any legislation asking Medicare beneficiaries to sacrifice without also raising taxes on the rich.
“I will veto any bill that changes benefits for those who rely on Medicare but does not raise serious revenues by asking the wealthiest Americans or biggest corporations to pay their fair share,” Obama said. “We are not going to have a one-sided deal that hurts the folks that are most vulnerable.”
Raising Medicare’s Eligibility Age Is Back on the Table
The hospital industry has mounted a fierce lobbying campaign to persuade Congress to raise the Medicare eligibility age from 65 to 67 by 2014. The hospitals are making the push in order to avoid billions of dollars of cuts in their future Medicare payments.
The deficit reduction plan agreed to by Congress calls for a 12-member Congressional “super committee” — six members from each party – to come up with between $1.2 and $1.5 trillion in budget cuts by Thanksgiving. If the committee can’t reach an agreement, hospitals and other health care providers will be hit with automatic Medicare payment reductions amounting to $45 billion over 10 years.
To prevent these cuts, the American Hospital Association is urging its nearly 5,000 members to lobby Congress to delay by two years the age that Baby Boomers can become eligible for Medicare. The hospitals have another incentive for requesting the change: private insurers pay them more than Medicare does, on average.
President Obama reportedly floated raising Medicare’s eligibility age during the deficit reduction debate, and it could be included in his recently proposed “modest adjustments to health care programs like Medicare.”
The hospitals maintain that the effect of delaying Medicare coverage would be minimized because the new health law allows the uninsured to buy their own health insurance through state insurance exchanges starting in 2014, and the law also provides a subsidy to employers who provide health insurance to their retirees.
But the employer subsidy would have little impact because less than a third of retirees age 55 to 64 get health coverage from their old employers. And Paul N. Van de Water, a Senior Fellow at the Center on Budget and Policy Priorities, argues that raising the eligibility age would simply shift costs from the government to the private sector. Although the federal government would save $5.7 billion, the change would cost potential beneficiaries, employers, states and other insureds $11.4 billion.
Van de Water says two-thirds of 65- and 66-year-olds who lose their Medicare coverage and join the exchanges would pay an average of $2,200 more a year in premiums and cost-sharing charges. The influx of would-be Medicare beneficiaries into the exchanges would also drive up premiums for younger enrollees, and if the health reform law is repealed, the exchanges will vanish and large numbers of 65- and 66-year-olds would be uninsured. Many of these uninsured would end up in emergency rooms, which would not help the hospitals’ bottom lines.
More On National Fiscal Responsibility and Reform
On February 16th and 27th, and April 4th, I posted three blogs about National Fiscal Responsibility and Reform. I hope they helped you understand and appreciate what was coming and has recently passed, that is, the Great Debate on Raising the National Debt Ceiling.
The best thing about the Great Debate is that it made the problem so visible, at least for awhile. Some identify the problem as economic, and certainly federal government expenditures of roughly $ Three Trillion per year when federal government revenues are roughly $ Two Trillion per year is an economic problem.
However, I suggest you think for yourself on this one. I suggest that you view the problem as one of personal responsibility: no one owns up to the personal responsibility for the economic circumstances in which we find ourselves as a nation. Anyone can see that this stretches from one administration to the next, and that, where debt is concerned, this administration stepped onto a runaway train. But is that an excuse for the current administration? No. Both parties have been there through the development of the debt, both saying yes to every budget, so both have been equal participants in creating the problem that we are struggling with. What were they thinking?
In rough terms, economically, something like this: we’ll grow out of it. No, not as in, “We’ll grow up.” But rather, the economy will grow in Gross Domestic Product rapidly enough that the National Debt, no matter how large, will always be manageable, because tax revenues will always be enough to pay for current spending, plus interest on the debt, and sometimes to reduce the principal in chunks, like when there’s no war going on. It will therefore be stable enough for the U.S.A. to keep the AAA credit rating for the bonds (debt) it issues and for the U.S. Dollar to remain forever the Reserve Currency of the Entire World, even though the debt will continue to grow. So don’t worry, growth of debt is O.K., and everything will be just fine. In other words, some kind of plausible rationale for going forward at each step.
In rough terms, politically, something like this: “I hope we don’t have to make a public explanation of this situation any time soon.” And, indeed, we did not receive economic explanations during the Great Debate. All of our leaders agreed the situation was very bad and that the other party and its agenda was the cause of it. Some were blatant blamers and some were more restrained, but blaming was the order of the day.
There is a blame story of sorts to tell, but it’s not that one. The President and Congress have very little, if any, influence on the economy. They handed over all monetary powers to the Federal Reserve Bank in 1913. The Fed is a private bank, owned by banks, and pays dividends on its shares owned only by banks. The Fed is a private Bankers’ Bank. Fed policy, not Government policy, is the dominant factor in economic growth and contraction.
The Fed has a legal monopoly of money granted by Congress and the President in 1913. No one sees Fed accounts; they are not audited. No balance sheets are issued. The Congress has never investigated the Fed and is highly unlikely to do so. The Fed has the power to create money. This money is fiction, created out of nothing. This can be money in the form of created credit through the discount window at which other banks borrow at the discount rate of interest, or it can be notes printed by the Treasury and sold to the Fed and paid for by Fed-created funds.
In brief, this private group of bankers has a money machine monopoly that is uncontrolled by anyone and is guaranteed to make a profit for them. Further, the monopoly doesn’t have to answer questions or produce books or file annual statements. Its activities are unrestricted, and it is not subject in any way to your vote or mine.
Once you understand how this works, you can understand how frustrating it is to be a politician when political control over the economy is so marginal. For example, as a politician, you would like to make promises to create jobs and then live up to those promises, but you haven’t a clue whether anything you do will really produce the results you intend.
So, when I said above you should view the National Fiscal Responsibility problem as one of personal responsibility, what might that mean for you? Perhaps learning more about how your country’s economy really works, like, who’s in charge here? What are the limitations under which my elected officials are functioning? How can the U.S. economy be run by people I never heard of who aren’t subject to being voted in or out of office?
Things like that. This is a self-study by the way. As you can imagine, there are very few books on the subject that aren’t of the “tin hat” or “conspiracy” variety, so you must select your reading material responsibly.
Cohabiting Seniors – Protect Your Rights
More and more seniors are living together without getting married. According to U.S. Census data, the number of cohabiting seniors nearly doubled between 1989 and 2000. For some seniors, marriage isn’t financially worth it‚ they don’t want to lose their former spouses’ military, pension, or Social Security benefits. Other seniors don’t want to have to pay their partners’ medical expenses or deal with the objections of children worried about their inheritance.
There are risks to cohabiting without marriage, however. You have no rights with regard to your partner’s health care decisions. In addition, in some states, you may be considered “common law” married by a court after you die, or your estate may be subject to a “palimony” or “property pooling agreement” claim, possibly causing a dispute between your partner and your children. If you and your partner plan to live together without getting married, you can take a number of steps to ensure that you, your partner and your children are protected and your wishes are followed.
•Sign a cohabitation agreement. If you live in a state that recognizes common law marriage or even if you don’t (some courts have recognized the rights of unmarried partners who lived together in non-common law states), you may want to enter into a cohabitation agreement with your partner. The agreement can state your intentions not to marry or to make any claims against each other. It can also specify the division of household expenses and what will happen to your house in the case of death or breakup. You should consult a lawyer for assistance in drawing up an agreement.
•Provide access to health care decision making. If you are not married, you have no right to participate in your partner’s health care decisions or even, in some circumstances, to visit your partner at the hospital. To avoid this situation, you need several documents. You can sign a Health Insurance Portability and Accountability Act (HIPAA) medical release to allow each other access to the other’s medical information. In addition, you should have a health care proxy and/or a durable power of attorney for health care, naming your partner as your agent to make health care decisions. For more information on medical directives, click here.
•Sign a durable power of attorney. A power of attorney allows your partner, or whomever you appoint, to make financial decisions for you if you become incapacitated. Without a power of attorney, the court will have to appoint a conservator or guardian to make those decisions and the judge may not choose the person you would prefer. For more on this, click here.
•Update your will. Your will should be clear about what happens to your possessions when you die, including your house and its contents. It is particularly important to specify what will happen to your house if it is owned by only one partner.
•Think about the tax consequences of gifts. Married couples can leave each other as much as they want without paying estate taxes; unmarried couples cannot. If you want to leave money to your partner, consult an estate planning attorney or tax expert to find ways to limit estate taxes. For more on estate planning, click here.
•Look into registering as domestic partners. Some cities and states have domestic partnership laws, which may allow unmarried couples to take advantage of their partners’ health insurance or to participate in health care decisions.
