The number of couples living together without marriage has increased sharply in recent years. The law holds many benefits for married couples, but these do not extend to those couples who are only cohabiting.
The unexpected death of one member of a couple is traumatic and emotionally difficult. If proper estate planning is done in advance, the loss need not be financially devastating as well.
Under Pennsylvania law, married couples receive several special benefits. Property and assets, if held in both spouses’ names are presumed to be held as “tenants by the entireties” which means that both spouses own the entire property. At the death of one spouse, the survivor continues to own the entire property and there is no need for the property to pass through probate; also, there is no Pennsylvania Inheritance Tax on these assets at the first death.
The Inheritance Tax Act allows for a family exemption of $3,500 to a surviving spouse. A surviving spouse also has an automatic right to a statutory share of the deceased spouse’s separate property. If there is no Will, the surviving spouse receives an intestate share. If there is a Will, the spouse has special rights to a portion of the estate and may choose to take the share stated in the Will, or to elect to take a statutory share.
None of the above rights and benefits apply to unmarried persons. Pennsylvania treats unmarried cohabitants as unrelated, and allows no special consideration. Pennsylvania no longer recognizes the concept of common law marriage. Prior to the abolition of common law marriage, it was possible to become married by intending to create a marriage. Those older common law marriages are still potentially valid but extremely difficult to prove, especially after one party has died. Common law marriage has three necessary elements: cohabitation, intention of both parties to create a marriage and a public representation or holding out of each other as spouses. A marriage license or ceremony need not be done and no specific length of time of living together applies. If all three elements can be clearly shown, a marriage may exist and carry with it the above legal rights. The most difficult element is proof of intention and after the first death, this can only be shown by witnesses. The situation often becomes a battle between the survivor who claims to be a spouse and the deceased person’s relatives who will inherit.
As an example, a man and woman reside together for five years, living in her house and he pays many of their mutual expenses including mortgage payments from his separate checking account as his income is larger. They do not go through any formal marriage. Perhaps they planned to be married in the future but there seemed to be no hurry, and they did not intend to create a common law marriage. She is killed in an auto accident. Her brothers and sisters are her next of kin and as she left no Will, they will inherit her estate. Suddenly, he is without a home and has only his checking §account and car. He does not share in the house even though he had paid for five years on the mortgage. There may be very substantial insurance money from the accident but it would go to her brothers and sisters, not to him. She may have had life insurance at work but it turns out she never got around to naming a beneficiary and so it also passes to her brothers and sisters. He is not only bereft at loss of her love and companionship, he is also destitute.
Persons who cohabitate over an extended time should consider making provision for each other at death. There may be joint debts such as utilities, charge cards and other obligations for which the survivor will remain liable. Credit life insurance on major obligations can be a very useful means of protection. Other possible options in the above example include: 1) placing the house in joint names with right of survivorship, so that it passes to the survivor at the first death. If this is done more than one year prior to death, there will still be an inheritance tax of 15 % but only on one-half the value. 2) Placing a bank account or investments in joint names, again with survivorship rights as above. 3) Naming each other as beneficiary of life insurance. 4) Executing Wills leaving each other a share. These planning tools are available to non-traditional couples, such as same-gender partners, who presently cannot marry in Pennsylvania.
Any or all of the above may be used to help to soften the blow of the loss and to allow the survivor to maintain his or her lifestyle. Of course, many who cohabitate have consciously chosen to refrain from marriage and its commitments. It is certainly possible that they might also choose to keep all financial matters separate. This may be handled in an informed and educated manner, and the choices can be made to best suit each party. It should be openly discussed by the couple, so that each knows what to expect in the event of a death. Each could elect to buy a separate life insurance policy on the other; this maintains the separate asset structure during life and still allows. the survivor to have some security.
Death itself is not subject to planning, but the financial consequences can be planned to prevent chaos.