Posted on September 04, 2002 at 17:00:49:
Married couples get a number of perks in the tax law; they can give each other gifts free of tax and leave their estates to each other tax-free, too. Unmarried couples don’t get such privileges, and they must structure their financial relationships to get around the problem.
For instance, unmarried partners owe estate tax on assets left to them (after the exempt amount). One path around that obstacle is life insurance, owned by a trust, to pay the estate tax incurred.
State law may declare that “next of kin” refers to a parent or a sibling. If a single person wants his or her assets to go to the unmarried partner, a will becomes extra-important. A durable power of attorney and a healthcare proxy should be prepared, too.
Check beneficiary designations for insurance policies, IRAs and investment accounts. Does the financial institution have its own forms? Pay special attention to employer-provided benefits.