Couples who live together without getting married often keep separate bank or brokerage accounts, and they might hold real estate and other property in their own name rather than jointly. That can be a smart strategy…But separate assets can present some problems as well…
If a couple has lived together for some time but never married, the question of who owns what can get downright ugly. Nor is it exclusively a problem for the unmarried couple. It is not unusual for a couple in a second, third or four marriage to hold their property separately just in case of another divorce. Unfortunately, just because you own assets separately doesn't necessarily answer the question of who is entitled to that property at your death nor does owning property jointly lead to a clear and unambigious answer either. We all know that jointly owned assets can lead to complications if you and your partner were to separate but what many do not know is that death can still leave the issue of ownership unresolved. What is equally surprising to many is that separately owned assets, even those with specific beneficiary designations, might not go to who you intended them to. That makes for one very messy estate plan for your loved ones to try an sort through ( or is that fight over?)
When it comes to jointly owned assets, there are myriad ways in which to titled them, it's not too hard to understand how problems might erupt. But a recent article in The Wall Street Journal entitled “Separate Assets, Joint Problems” lists just of few unintented consequences loved ones might experience if there is a failure to craft a proper estate plan. What are the biggest problems with separate assets? The original article gives four points to ponder:
- If you are married or your state recognizes common law marriage, those assets aren’t necessarily considered separate property at your death.
- Separate accounts may foster a failure to communicate: who did you want them to go to?
- Separately owned property may be at greater risk in a bankruptcy or lawsuit.
- Separate accounts can lead to administrative difficulties.
When you boil it all down, the underlying difficulty behind three of these points is simply coming to terms with what separately held assets mean for a married couple who mistakenly believes that just keeping assets separate means that you can leave them to who you want to at your death.
How can this happen, you ask? Well, sometimes assets are not truly separate because state law makes them marital. For example, Virginia statutes will not allow you to 'disinherit' a spouse at your death; spouses are entitled to one-third of your estate regardless of what yur estate plan may direct. The need for prenuptial agreements is fairly clear. The time and money spent getting competent legal, financial and tax counsel may be well worth the investment.
You can learn more about this topic as well as other strategies on our website under the tab entitled: estate planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.
Reference: The Wall Street Journal (November 10, 2013) “Separate Assets, Joint Problems”