Estate Planning for Married Couples vs. Unmarried Couples: Part 1

We were recently asked about what special estate planning tactics should be considered for a same-sex couple as opposed to a heterosexual couple. With the 2015 US Supreme Court’s decision in Obergefell v. Hodges, there is no difference in the estate planning between the two types of couples. Married same-sex couples have the same estate planning rules that heterosexual couples have. The only question for the estate plan is whether a couple is married or unmarried.

This is a two-part discussion on estate planning for married vs. unmarried couples. This first part will cover the rules of how a married couple is treated in an estate compared to an unmarried couple. The second part will apply the rules to different situations.

Differences in Estates for Married vs. Unmarried Couples

1. Dying Without a Will – Intestate Succession.

With regard to assets that pass through probate at death, which not all do, if the person died without a will, he/she is deemed to have died “intestate.” When this occurs, the state laws direct who inherits the probate assets. In Tennessee, the person’s probate assets would be divided as follows:

  • If married and no children, everything passes to the surviving spouse.
  • If married and one child, 1/2 goes to the surviving spouse, and 1/2 goes to the child.
  • If married and two or more children, 1/3 goes to the surviving spouse and the remaining 2/3 are divided among all the children. If there are two children, each child receives 1/3. If there are three children, each child receives 2/9ths. But the surviving spouse always receives no less than 1/3, no matter how many children there are.
  • If single, then divided equally among the children.
  • A deceased child’s portion is divided up for the child’s own children. If a deceased child is to receive a 1/3rd portion and has two children, then the two children of the deceased child would receive 1/6th (being 1/2 of the 1/3rd portion). This dividing of the assets for the deceased beneficiary’s children is referred to as a “per stirpes” distribution.

2. Spousal Elective Share.

While a surviving spouse is not legally entitled to be part of his/her deceased spouse’s will, the surviving spouse does have the ability to receive a portion of the deceased spouse’s assets. The surviving spouse has a statutory right to an “Elective Share” of the decedent’s probate assets. The amount of time the couple is married dictates what portion the surviving spouse can receive. The amount allocated to the spouse through the Elective Share passes as directed by the will to the other beneficiaries.

Without going into the details of the Elective Share calculation, in general, the surviving spouse’s portion will be:

  • 10% of the probate assets if the couple is married less than three years.
  • 20% of the probate assets if the couple is married three or more years but less than six years.
  • 30% of the probate assets if the couple is married six or more years but less than nine years.
  • 40% of the probate assets if the couple is married nine years or more.

3. Spousal Allowances and Exemptions.

Under statute, a surviving spouse (1) of someone who died intestate or (2) claims the Elective Share against his/her spouse’s will, is allowed to receive certain amounts and assets, regardless of what the deceased spouse’s will directs. These are:

  • A. Exempt personal property and a personal motor vehicle have value, collectively, not over $50,000.
  • B. An amount of money to provide the surviving spouse with reasonable support and maintenance allowance during the first year after the spouse’s death. A court determines this amount based on the surviving spouse’s previous standard of living and taking into consideration the size of the decedent’s estate.
  • C. Homestead exemption, which is a life estate of $5,000 in the residence.

4. Right of Survivorship Through Tenants by the Entireties.

When a married couple owns an asset – bank account, investment, real estate property – in both their names, it is owned by them as “Tenants in the Entirety”. This is a special class of ownership for a married couple with benefits and preferential treatment for the couple. One of the benefits is an automatic right of survivorship at the first death. When the first of the couple dies, the survivor becomes the sole owner of the asset. The will and the probate process have no authority over the passing and ownership of the decedent’s portion of the asset.

5. Estate Tax.

Estate taxes allow a couple to pass an unlimited amount of wealth to the other at death. This is referred to as an “unlimited marital deduction.” It does not matter if at the death of the first of the couple $50,000,000 passes to the survivor, no estate tax will be owed. Unmarried couples do not receive this tax benefit. Assets that pass between unmarried couples are subject to the same tax regime as when assets pass from a parent to a child or to any other non-spouse beneficiary.

Learn More About Estate Planning for Married vs. Unmarried Couples

There are many differences in estate planning for married vs. unmarried couples. In the next edition, we will look at these situations and how the outcome is different between a married couple and an unmarried couple.

Follow along with the MHPS blog to learn more about how estate planning varies depending on your situation.

Ready to Get Started?

You don’t have to face a legal case alone. Get the support and guidance you need to make informed decisions and navigate the complexities of the law. Reach out today, and let’s take the first step together.