Loving each other, living together and even having kids without marriage, for some people in California, is their preferred way of life. Of course, it has some benefits, as it reduces the pressure to go through the legal process of marriage and all that it entails. However, when it comes to retirement and estate planning, unmarried couples can face unique challenges.
What happens in case one of you dies
In a way, everyone in California has an estate plan. If you don’t have one that you created for yourself and your family, the state has a default plan for you.
If one of you dies without a written will, assets in a trust or other appropriate estate planning tools, your assets will go to your children only, i.e., if you have biological or legally adopted kids. If you don’t have children, your other blood relatives, like your parents and siblings, will be next in line for inheritance. Your unmarried partner will get nothing.
What you can do
First, you may both want to name each other in your wills. You can name them as primary beneficiary, contingent beneficiary (in case of death before you) or both. A primary beneficiary has rights to your assets immediately upon your death, while a contingent beneficiary will receive their allocated property only if all primary beneficiaries have already passed away.
You could also create a trust together, where you both are trustees and can decide how and when to distribute assets after one of you passes away. The best thing about trusts is that they avoid probate, meaning that distributing assets will be much quicker and simpler.
Lastly, consider naming your unmarried partner as one of your beneficiaries in your IRA or 401(K) plan for retirement. This would ensure that your partner gets some of the money you have saved up for retirement in case something happens to you.
Retirement and estate planning are important for everyone, especially unmarried couples in California. By planning ahead properly, you can guarantee the well-being of your loved ones in the event of death or illness.