Estates, Gifts, And Trusts (EGT)

Estate Planning for the Unmarried Adult (Portfolio 813)

  • This Portfolio analyzes tax and non-tax issues that face American adults who are either divorced, widowed, or by legal proscription, are not involved in a marital relationship.


Bloomberg Tax Portfolio, Estate Planning for the Unmarried Adult, No. 813, addresses a wide range of tax and nontax issues that face the growing number of American adults who, from choice, divorce, outliving a spouse, or legal proscription, are not involved in a marital relationship. This Portfolio discusses the definition of who is a “spouse” or “family member” and situations in which a family-type relationship is recognized.

This Portfolio also addresses “marriage penalties” and “marriage advantages” implicit in the tax law. For example, married couples often have a higher income tax liability than two cohabiting unmarried individuals (domestic partners) earning the same income and having the same deductions. On the other hand, a spouse can obtain employer-provided health insurance for his or her spouse without income tax consequences, unlike a domestic partner to whom income equal to the value of his or her partner’s insurance premiums is imputed.

The recognition of a family, or nonfamily, relationship is critical in the transfer tax area. Because unmarried couples do not have the benefit of the unlimited gift and estate tax marital deductions, they cannot avail themselves of important estate planning strategies and must analyze financial transactions and property acquisitions for their transfer tax consequences. On the other hand, the Chapter 14 special valuation rules will not apply to domestic partners and other unmarried couples, making available estate freezing techniques, such as grantor retained income trusts, that are unavailable to traditional family members. Unanticipated generation-skipping transfer tax consequences also may arise if there is a great age disparity between domestic partners or if one partner wishes to benefit the child of the other partner.

This Portfolio also discusses alternative financial arrangements unmarried adults can make, including the use of partnerships to acquire life insurance and real property and provide income to the less wealthy partner. The Worksheets include a sample cohabitation agreement that domestic partners can use to define their property rights, as well as a sample limited partnership agreement. Finally, this portfolio addresses the special problems a disabled or incompetent unmarried adult might face because of the lack of a legally recognized relationship with the individual designated as surrogate decision maker.

This Portfolio may be cited as Horwood, Zaluda, Wolven and Hudgins, 813 T.M., Estate Planning for the Unmarried Adult.

Table of Contents

I. Introduction
II. Marriage Penalty and Marriage Advantage
III. Who Is a Family Member?
IV. Transfer Tax Planning
V. Life Insurance
VI. Benefits, Entitlements, and State Law Rights
VII. Defining Property Rights
VIII. Disability and Incompetence

Richard Horwood
Horwood Marcus & Berk Chtd
Jeff Zaluda
Horwood Marcus & Berk Chtd
Lauren Wolven
Partner, Trusts & Estates Group
Levenfeld Pearlstein, LLC
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