It’s not uncommon for couples to forgo marriage. Instead, they choose to live their lives together as
partners and significant others. But what does that mean for the other person when their partner dies?
In this particular situation, “Ed” wants to leave his estate to his long-time girlfriend, but he doesn’t want to
make one lump sum payment. Ed wants to leave her a set amount per month when he dies. We will use
Ed’s situation to explain how an inheritance works with non-married partners.
Should a Girlfriend Get Inheritance?
Depending on the situation – absolutely, but the courts see it differently. Although many couples live as if
they are married, there is nothing official to legally bind them. So, while the other partner may want them
to inherit their estate, the laws dictate otherwise.
If there is no estate plan in place and the decedent died without a Will, then the reality is that the partner
will receive nothing. Unfortunately, the laws do not include a non-married partner when distributing an
estate without a will.
In the absence of a Will, the decedent’s next of kin would inherit the estate. By default, this would be the
kids, grandkids, extended family, and so on, but not the partners. This may be completely contradictory to
the decedent’s wishes, as the case with Ed.
While Ed intends for his girlfriend to inherit his estate, he will also need to evaluate and ask himself “are
my heirs ok with this?”
What is the Best Way to Leave an Inheritance?
In this situation, as Ed wants to leave his estate to his girlfriend and does not want to leave a lump sum, a
Trust is recommended. A Trust acts as a wrapper for your assets; protecting them after you die. The trust
distributes your estate as you wish, and in this case, it’s to be distributed over time in monthly increments
to his girlfriend.
A Trust is actually a gift in and of itself. It is asset protection that your partner can’t buy for themselves.
Not only does a Trust protect your assets, but it eliminates risk factors such future divorce, bankruptcy,
creditors, and IRS. For example, if Ed’s girlfriend gets remarried, then divorced, the Trust protects the
assets from being distributed to the ex-husband.
How to Control How Heirs Spend Your Money
A Trust can limit how the money is spent. After all, it’s your estate and legacy. By articulating your wishes
in a Trust, you control how the money is used, who it is used for, and when it can be used.
With a Trust, you have the ability to use your money to afford your heirs a good life by limiting the
recipient’s spending to health, home, education, etc. This is actually quite broad, as many expenditures fit
into this category, such as a new home and college.
Another bonus – limiting spending with a Trust helps to control free-spenders, gamblers, and addicts.
How Do Trust Funds Pay Out?
A trust can set a specific dollar amounts or a percentage to be distributed. In Ed’s situation, he has
decided to allocate $1,000 per month to his girlfriend. While this is great for the current financial climate, it
does not consider inflation. In 10 to 15 years, $1,000 could feel like $500 or less. Therefore, some opt to
give a percentage. Then, as the Trust grows and normal inflation occurs, they will grow together.
A trust can be paid monthly, quarterly, or annually. The drawback to annually, is that it feels like a lump
sum. Generally, payouts are done monthly. People often as us, “how do you get the money – do you
have to call someone every month to receive it?” The short answer is “no.”
It is very easy to setup direct deposit or automatic checks. The administrator of the trust typically sets this
up in the beginning and the recipient receives their payments automatically, without asking.
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