Checklist of Planning Issues for Nontraditional Couples

Three primary questions to keep in mind:

o What are the implications of being “legal strangers” (unrelated parties) versus being legally married partners? (e.g. no spousal social security benefits, no automatic right to inherit).

o What would happen if one of the partners died?

o What would happen if the couple broke up?

Net Worth and Cash Flow

Assets and Liabilities

o How were the assets acquired and how are the assets titled?

 For jointly owned assets, were the assets purchased by both partners at the same time or was a partner added to a deed at a later time?

 Are both partners contributing equally to the mortgage payments on jointly held property or are they paying in by proportion of income? Is this being reflected correctly on the income tax returns?

• Are the partners tracking their contributions to the mortgage to establish their basis?

 For assets held in individual name, are both partners contributing to the mortgage?

• Is there a relationship or property agreement in place that explains how the assets are to be divided if the partners break up?

o Is one partner inadvertently disinheriting the other and/or the partner’s children who have not been adopted?

 Are the beneficiaries on the retirement assets up to date? Do the taxable accounts have transfer on death provisions?

 

Income and Expenses

o How does the family handle expenses?

 Do they pool their incomes and pay expenses out of a joint account? .

 Does one partner provide more than 50% of the other’s financial support?

Are expenses reflected correctly on the income tax returns?

Insurance & Risk Management

Life insurance
Does the family have adequate coverage to meet all of the usual needs (such as income replacement)? Does the family have adequate coverage to meet the needs that are unique to unmarried partners?

Auto insurance
o Is each partner listed on the other’s insurance policy as a driver?

Homeowner’s insurance
o If a couple is living together, but only one person is on the deed, does the non-owner partner have renter’s insurance to protect their assets?

o Health insurance
Is the couple aware that the benefits provided by an employer for the domestic partner are considered taxable income?

Gift and Transfer taxes
 Are the partners transferring more than the $13,000 annual exclusion between them

o Are the partners keeping track of their contributions to the ownership of assets?

o Would each spouse be able to prove how much they paid of the mortgage?

o Is there a plan for the division of the assets if the couple were to break up?

o Does this plan recognize that the division of assets of an unmarried partnership may cause a taxable event?