Domestic Partnerships Continued
Unmarried persons, whether single or recognized as domestic partners, are at an advantage in terms of making gifts for tax planning transfer for the purposes of reducing an estate. This is because unlike married couples, unmarried couples, even domestic partners, are not permitted to split gifts, and tax free transfer of property, afforded to spouses, is not applicable in the cases of transfers between unmarried or domestic partners.
Transfers between unmarried partners may affect the placing of property in joint tenancy, can cause hardships for couples who are sharing living expenses, and may be subject to other additional fees and penalties.
Fortunately, exclusions can be applied, in some cases, with the filing of a gift tax form
Exclusive Estate Planning Options For Non Traditional Families
Aside from those previously mentioned, there are other estate planning options that are available to unmarried couples.
The transfer of all incidents of ownerships from an existing policy from the insured to the trustee of an irrevocable trust, for the benefit of the domestic partner. If the insured lives for three years from the transfer date, the trustee will receive all proceeds at the time of death of the insured, outside of the assets bound to the insured’s taxable estate.
Partnerships are commonly used for life insurance planning purposes, and allows single parents, domestic partners, or business partners to be insured under the policy of another. Life insurance partnerships are formed with the insured as the sole general partners and beneficiaries as the limited partners. Domestic partners who are using a partnership agreement in order to own insurance on one or both are usually advised to include a provision within the partnership agreement that negates the power of the insured to exercise incidents of ownership with respect to the partnership owned policy on an individual’s life.
Estate planning encompasses many issues and steps, each with its own regulations and complexity. Non traditional family arrangements, whether they are common law marriages, domestic partnerships, same sex partnerships, blended families, adult adoption, or any other type, can further complicate the estate planning process. For this reason, anyone, regardless of familial or marital status, planning their estate should not proceed without first consulting the advice of a certified financial advisor. These professionals are well versed in the laws, regulations, exemptions, and restrictions related to the estate planning process, and can help to create personalized solutions on an individual basis.