Unmarried couples aren’t ‘default unit’ if one dies. Why that matters

For unmarried couples in long-term relationships, being non-spouses from a legal standpoint may be an unremarkable part of everyday life.

In the event of death, however, that unwed status can make a huge difference. While the person who passed away might have wanted their partner to receive all or some assets, they “don’t get the automatic safety net that comes with marriage,” said certified financial planner Jared Gagne, an associate wealth advisor with Claro Advisors in Boston.

“The most important thing to understand is that the law does not see you as a default unit,” Gagne said. “If one partner dies without planning, state law typically sends assets to blood relatives … not the partner who’s been sharing a home and a life with them.”

Living together without formally marrying has become a more common arrangement and largely accepted: According to a 2019 Pew Research Center study, 69% of U.S. adults say cohabitation is fine even if a couple doesn’t plan to get married. 

That viewpoint has occurred alongside shifts in when people get married — or if they do at all.

Fewer than half, 47%, of U.S. households — of which there are roughly 135 million — are married couples, according to the U.S. Census Bureau. That’s down from about 66% in 1975, when there were just over 71 million U.S. households. The estimated median age at first marriage is now 30.8 for men and 28.4 for women, up from ages 23.5 and 21.1, respectively, in 1975.

Additionally, roughly 9.5 million households in 2024 were headed by unmarried partners, according to the latest Census data. That compares with 61.4 million households led by married couples. 

Among older adults — those age 50 or older — 4.6 million were living unmarried with their partner in 2022, according to Bowling Green State University’s National Center for Family & Marriage Research. That’s up from fewer than 1 million in 2000.

The first key document to put in place long before you need it involves pre-death considerations — giving financial and medical authority to each other in case one of you becomes incapacitated, CFP John Hixson, a senior advisor at FMP Wealth Advisers in Lake Charles, Louisiana. The firm ranked No. 16 on CNBC’s Financial Advisor 100 list this year.

“The big mistake is people don’t do anything at all or they [try to] do it too late,” Hixson said.

“Their intention is to own everything together, take care of each other, but then one will have a [major] stroke,” he said. “You can’t execute a legal document at that point.”

Durable powers of attorney for health care would allow your partner to make medical decisions on your behalf if you cannot on your own. This is separate from a living will, which states your wishes if you are put on life support or suffer from a terminal condition.

You also can extend powers of attorney for your finances, which would allow your partner to manage your money and access your accounts in that same situation. 

However, it may be worth checking if your financial institutions require you to fill out a specific legal form, Hixson said. Some investment custodians may not recognize powers of attorney unless a specific document is officially attached to your account, he said.

The next standard document you should have is a will, where you state your wishes about who gets what. If you die without one — called dying intestate — the courts in your state will pass everything on according to state law, which could mean assets will go to the closest living family member.

However, a will alone won’t necessarily cover all your bases. For example, whoever is listed as a beneficiary on each of your tax-advantaged retirement accounts — individual retirement accounts, 401(k) plans and the like — will generally get the money, regardless of what your will says. The same goes for life insurance policies and annuities. Health savings accounts also should have a beneficiary listed.

“Unmarried couples should review those forms … to confirm a partner is intentionally named wherever appropriate and that old beneficiaries — like an ex-spouse — have been removed,” said Gagne, of Claro Advisors.

If no beneficiary is listed on these accounts, the money generally ends up being included in your assets that are subject to probate, which is the often-lengthy process of the court validating your will (if there is one) after your death. Some states allow small estates to go through a simplified probate process or excuse them from the process altogether.

For bank and brokerage accounts owned individually, you can contact your financial institution to find out how to make sure the money goes where you want it to after death. In some cases, this may be a “payable on death” or “transfer on death” designation. Certificates of deposit, or CDs, can also get the designation.

If you want your partner to inherit your home and you are the only person on the deed, be sure to make your wishes known in your will.

Alternatively, Hixson said, you can create a revocable living trust and put the house — as well as other assets that may otherwise be subject to probate — in the trust. This would allow you to manage your assets while alive, and then pass them directly to the intended beneficiary without going through probate.

You also could create a trust “that lets a surviving partner live in the house or receive income for life, while legally locking in that the remaining assets ultimately pass to your children, siblings” or other beneficiaries, Gagne said.

Disclosure: CNBC receives no compensation from placing financial advisory firms on our Financial Advisor 100 list. Additionally, a firm or an advisor’s appearance on our ranking does not constitute an individual endorsement by CNBC of any firm or advisor.