Financial
Financial planning for unmarried domestic partners
How times have changed. Less than 22 percent of American households are composed of married couples with dependent children, according to the latest U.S. Census. That number has dropped significantly: In 1970, 40 percent of households fit in that category.1 Meanwhile, over the past 40 years, the number of unmarried couple households has tripled to nearly 4 percent of the population; there are currently about four million such households in the United States.1
Legal protections
Unlike married couples, unmarried partners lack many of the legal protections or rights granted to spouses in the event of divorce or death. Although most states will consider a claim by an unmarried partner, there is no specific legal precedent in the absence of a written contract. Therefore, couples may wish to consider creating a domestic partnership agreement. This document can detail the sharing of expenses as well as the ownership and distribution of assets should the relationship end. A domestic partnership agreement is especially important in situations where one partner is the primary breadwinner or owns the majority of assets.
Decision making control is another crucial issue. Unmarried partners should create durable power of attorney and health care proxy documents. Some states also require a living will to address life-support issues. Creating a letter of instruction regarding burial or memorial preferences should also be considered. If such documents do not exist, an unmarried individual may find that his or her partner’s blood relatives will be allowed to make these key decisions if the need arises.
Unmarried couples with children face another concern: legal guardianship. Nearly 40 percent of unmarried couples have children under the age of 18.1 Yet legal guardianship of these children may not be as sound as for married couples. Because of this, unmarried couples should consider signing a written agreement acknowledging parental rights and responsibilities and having each partner name the other as primary guardian in wills.
Achieving a comfortable retirement
Although both married and unmarried couples need to save for retirement, unmarried couples may need to save more. Why? Because they will not be eligible for each other’s Social Security benefits and, in some cases, employer-sponsored retirement plan distributions unmarried partners should check their plan rules and specify plan beneficiaries. The IRS now allows a nonspousal beneficiary of an IRA to take required distributions over his or her lifetime rather than in a lump sum, allowing for potential tax-deferred growth over a longer period of time. Therefore, you may wish to contribute the annual maximum to an IRA ($5,000 in 2011; $6,000 age 50 and over)) before maximizing contributions to an employer-sponsored retirement account.
Annuities may also be an attractive investment vehicle since they allow for unlimited after-tax contributions, regardless of income or sources of income. Additionally, the payout methods of annuities usually include insurance features, enabling a named beneficiary or beneficiaries to receive payments if the owner dies before withdrawals begin.
When discussing retirement issues with your trusted advisors, remember to review all financial documents, including employer-sponsored retirement accounts, IRAs, annuities, and life insurance policies, to ensure named beneficiaries are consistent with those mentioned in wills.
Estate planning issues
For a spouse, a marriage certificate is the gateway to a number of financial benefits that unmarried partners do not necessarily possess. This disadvantage is especially apparent in regard to estate planning.
It’s essential for domestic partners to create wills. If you die without a will, the state may distribute your partner’s assets to his or her closest blood relatives. To help rebut a challenge to a will, domestic partners may want to videotape their wishes in the presence of an attorney. Additionally, a living trust may be desired because it remains confidential and is not subject to probate.
Transferring assets upon death requires careful planning for unmarried partners. For example, federal tax law allows all assets to pass to a spouse tax free and no applicable estate taxes are due until the second spouse dies. Unmarried couples do not enjoy this tax advantage.
If you have significant taxable assets, it will be necessary to pursue other avenues to potentially reduce estate tax. Currently, the federal estate tax is 35 percent on estates over $5 million, but the rate is scheduled to increase to 55 percent and apply to estates in excess of $1 million in 2013 unless Congress enacts new legislation. To help reduce tax liabilities for the surviving partner, you can purchase life insurance to pay any potential federal and state estate taxes. A surviving partner must own the insurance to avoid it becoming part of the estate of the deceased. Therefore, each partner must own enough insurance to pay any anticipated taxes on the assets of his or her partner.
Points to remember
Unmarried couples may wish to create a domestic-partnership agreement, which should detail the sharing of expenses as well as the ownership and distribution of assets should the relationship end.
Legal protections, such as durable power of attorney and health care proxy documents, and in some cases, a living will, can help safeguard decision-making control, if one partner is unable to make financial or health care decisions.
Domestic partners may need to save more for retirement than married couples. Annuities and IRAs may be attractive retirement savings vehicles for such couples.
Careful estate planning, including the use of trusts, may be appropriate for effective wealth transfer as unmarried partners will not enjoy tax advantages that federal law bestows upon spouses.
Source: U.S. Census Bureau, based on 2009 census estimates (latest available).
Potential purchasers seeking to use an annuity to fund a qualified or other tax-advantaged retirement plan should understand that the use of an annuity for such purpose is not necessary to defer taxation of investment earnings.
Morgan Stanley Smith Barney and its Financial Advisors do not provide tax or legal advice, are not “fiduciaries”(under ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein, and this material was not intended or written to be used for the purpose of avoiding tax penalties that may be imposed on the taxpayer. Individuals should consult their personal tax and legal advisors before making any tax or legal related decisions.
The author(s) and/or publication are neither employees of nor affiliated with Morgan Stanley Smith Barney LLC (“MSSB”). By providing this third party publication, we are not implying an affiliation, sponsorship, endorsement, approval, investigation, verification or monitoring by MSSB of any information contained in the publication.
The opinions expressed by the authors are solely their own and do not necessarily reflect those of MSSB. The information and data in the article or publication has been obtained from sources outside of MSSB and MSSB makes no representations or guarantees as to the accuracy or completeness of information or data from sources outside of MSSB. Neither the information provided nor any opinion expressed constitutes a solicitation by MSSB with respect to the purchase or sale of any security, investment, strategy or product that may be mentioned.
Article written by McGraw Hill and provided courtesy of Morgan Stanley Smith Barney Financial Advisor Gregory Lawson. Morgan Stanley Smith Barney LLC. Member SIPC.
One of the biggest headaches of the new home process is the actual moving part. By the time someone is buying a home, most people are beyond the “I just need a pickup truck, a pizza and a case of beer for my friends.”
If that is still someone’s preferred way to move, that’s great. However, many people find they need a much more robust plan. It can also trigger a lot of feelings about items one owns, what to do with them, do they have too much, should I keep this memento that I never use? Etc.
Moving is a chance for a person to “clean house” literally, figuratively, spiritually and energetically. A person can figure out which items they want to keep, and which need to go. As someone who recently moved across the country, I can speak to this experience. It’s also time for what people call “the fresh start effect.” This phenomenon, according to psychologists, can happen in little moments (like the start of a new work week) and bigger moments (such as moving from one home to the next).
The fresh start effect offers these benefits often mentioned by psychologists:
- Mental Accounting: Dates act as chapter breaks, letting you put past failures into a previous period.
- Psychological Distance: You separate your flawed past self from your aspirational future self (“That was the old me”).
- Optimism Boost: New beginnings clear mental clutter and increase your sense of agency and control
Does this mean that “the new you” will be the perfect version you envisioned? Probably not. We are humans. But it might mean you get a chance to “leave some of the old you behind” within the walls you used to live in, and now have a chance to have a new layout, a new décor, a new color pattern, new wallpaper, donate old furniture and books or magazines, throw out clothes you no longer use or fit in, and enjoy the opportunity to literally use the, “Does this spark joy?” method that was made so popular by Marie Kondo in her Netflix series.
So, for all its hassle and headache, moving is a chance to shake off the “old you” and try on the new you, to incorporate the items you would like to keep and use more of, and shed the items, habits, and ways of thinking that you feel no longer serve you.
I can speak to the experiences that several of my clients had when they moved from a previous residence to a newer one. It usually coincided with a change in relationship status, a change in employment, a change in family size, but sometimes it just seemed to correlate to a new attitude and perspective that the client was really hoping for.
I have literally had clients come to me after the fact, in tears, that they were so happy they made the decision to move out of a situation that no longer served them, and move into one that felt like a much better fit.
Change can be annoying and overwhelming at times, but usually most people come out the other side, not wanting to return to the way they were before.
Joseph Hudson is a referral agent with RLAH. Reach him at 703-587-0597 or [email protected].
Real Estate
With gas prices soaring again, a staycation is a good plan
Home can be your personal retreat and your own private resort
When airfare costs more than your monthly utility bill and a weekend road trip requires a second mortgage just to fill the gas tank, many homeowners are discovering an unexpected luxury: the staycation.
A staycation isn’t settling for less—it’s reaping the benefits of one of the biggest investments you can make: your home. Much more than a place to sleep, it’s your personal retreat, your gathering place and, with a little preparation, your very own private resort.
Whether you own a single-family home, a townhouse, or a condo, creating a memorable staycation starts with appreciating what made you fall in love with your property in the first place.
Start with a home refresh. Think about checking into a beautiful vacation rental. It’s spotless, organized, and inviting. You can recreate that same feeling by spending a day preparing your home before your staycation officially begins.
Clear away clutter, deep clean the bathrooms and kitchen, wash the windows, and put fresh linens on every bed – even if you’re not expecting guests. Fluff the pillows, light a favorite candle, and place fresh flowers on the table. These small touches instantly make your home feel more luxurious.
If your budget allows, hiring a professional cleaning service can be one of the best staycation perquisites you make. After all, vacation should begin the moment you wake up and not after you’ve spent the day scrubbing floors.
Treat your staycation like a real trip. Set away messages on your phone and out of office notices on your email. Skip unnecessary chores for a few days. Giving yourself permission to relax may be the most valuable part of the entire experience.
One of the greatest advantages homeowners have over travelers is private outdoor living space. Whether it’s a spacious backyard, a screened porch, a rooftop terrace, or a cozy condo balcony, these areas can become the centerpiece of your staycation.
Stringing lights and adding comfortable seating, colorful planters, and outdoor rugs can completely transform the atmosphere without spending thousands of dollars. Add a portable fire pit, a tabletop fountain, or a hammock, and suddenly your backyard starts competing with many resorts.
Host an evening cookout, organize a game night, invite neighbors over for dessert, or gather around the fire pit for conversation after sunset. These simple moments often become the memories we treasure most.
Inside, transform your family room into a home theater complete with popcorn and comfortable blankets. Turn your breakfast room into a morning coffee café. Designate a quiet reading corner where phones are prohibited. Create a spa-like bathroom with plush towels, candles, bath salts, and relaxing music.
One of the highlights of traveling is experiencing new food. Instead of dining out every night, create themed dinners inspired by your favorite destinations. Prepare homemade Italian pasta one evening, Caribbean grilled seafood another, or a backyard Texas barbecue over the weekend. For a touch of whimsy, dress the part.
Pair each meal with music and libations from the region and enjoy dinner outdoors whenever possible. Suddenly, your dining room becomes part of the vacation experience instead of just another place to eat.
Families with children can turn a staycation into an adventure by seeing their home through a child’s eyes. Set up a backyard camping experience with a tent, flashlights, and s’mores around the fire pit. Transform the living room into an indoor campground complete with sleeping bags and a movie under a blanket “fort.” Organize a backyard Olympics with relay races, water balloon tosses, scavenger hunts, or miniature golf using household items.
Encourage children to plan a family picnic in the backyard or on the patio, choose a theme for a movie marathon, or help prepare meals inspired by countries they’d like to visit someday. The goal is to create experiences your children will remember long after summer is over.
Enjoy the amenities you already pay for. Condominium communities and many planned neighborhoods offer amenities that residents often overlook.
Swimming pools, fitness centers, tennis and pickleball courts, walking trails, clubhouses, grilling stations, and community gardens are designed to enhance your lifestyle. During your staycation, make a point of exploring everything your community offers. You may discover you’ve been living beside your own private resort all along.
Real estate professionals often talk about resale value, appreciation, and return on investment. While those things certainly matter, there’s another return that’s harder to measure: the enjoyment you get from living in your home every day.
You don’t need a boarding pass to recharge. You don’t need a hotel reservation to make memories. Sometimes the perfect getaway is the one you already own.
Valerie M. Blake is a licensed Associate Broker in D.C., Maryland, and Virginia with RLAH @properties. Call or text her at 202-246-8602, email her at [email protected] or follow her on Facebook at TheRealst8ofAffairs.
Real Estate
When buying a home, it’s decisions, decisions, decisions
Keeping notes on the process makes for an informed purchase
When looking to buy a home, there are lots of details to consider. Many of my clients would come to me and say, “Joe I want to buy a place, but I haven’t decided which neighborhood to buy in.” And the struggle was real. A few clients had everything decided from the color of the hallway walls to the cabinet handles and sometimes which three square blocks they wanted to look at.
But other clients were occasionally looking at properties in areas as distinct as Union Market/NOMA, Brookland, Logan Circle, and then we would even go across the river to look at a property in Shirlington or the Van Dorn areas of Virginia, which all have their own unique flavor and characteristics.
Sometimes clients would tell me, “I only want to look in Mount Pleasant or Adams Morgan.” Or, “don’t even show me any properties west of this street or south of that street.” My job wasn’t to convince people where to live. It was to just take the parameters they set for me and find as good of a property in that zone as I could, coordinate the showings and, if necessary, offer the strategy.
One can see that buyers often had more decisions to make than a seller. From a seller’s perspective, the house was where it was, and we just had to make the best of it. But working with a buyer could mean looking at five different neighborhoods, and then being a “thought partner” to help them figure out which were the top two or three areas they had seen, and then further distilling those down into what was available and weighing those options against each other.
One house could have the dream bathroom but also be located six blocks further from a Metro stop, walkable shopping and dining, and “just too far away from my friends.” Another house could have all the neighborhood options a client was looking for, but was just not in turnkey condition, and would require an additional $30,000 of upgrades once purchased to make it into the dream home they envisioned.
One activity I often asked buyers to do was to keep an active list in their heads of the properties they liked, and to keep a running rank of the top three. I often encouraged them to bring a notebook along on the journey where they could take notes and write down questions they thought of as they looked. It was an important decision, and sometimes the largest purchase of their lives. Why not take it a little seriously, and take notes? This could often help the buyer later when they felt it was time to decide.
The point here is, keeping a notebook handy can sometimes help a person with what feels like an overwhelming process. It provides a space to explore how one feels, jot down important details to remember, and then use that to make an informed decision.
Joseph Hudson is a referral agent with RLAH. Reach him at 703-587-0597 or [email protected].
