Statistics show that non-traditional families make up a significant sector of our population and they face unique estate planning issues in order to ensure that the partners involved are cared for as those in traditional relationships. The issues that non-traditional families face can often be handled with the most traditional estate planning tools. A Non-Traditional family for purposes of this article is defined simply as a two or more person relationship that is not recognized by both the state and federal governments as a marital relationship. These may include same gender partners, couples of the opposite sex, (common law marriage is not recognized in North Carolina), and domestic partners as well siblings, parents and adult children or grandparents and grandchildren. To be concerned with the issues of estate planning, individuals must also be in a loving and economically interdependent relationship. This would also include a desire to be economically generous and have a desire to provide economic benefit to the survivor of the relationship. This can include a single or a surviving parent with a dependent minor or adult child, siblings living together and dependent upon joint income and mutual care, or unmarried partners. Statistics show that estate planning for non-traditional families is a significant issue facing our society. The 1970 and 2000 census reflects that married couples make up only 53% of the households in 2000; a decrease from 71% in 1970. Professionals that refuse to address this issue are denying services to a significant sector of our population.

Many state and federal income, gift tax, and estate laws provide benefits to the taxpayer spouses, but do not apply to unmarried couples and other members of non-traditional families. For example, U.S. citizen spouses qualify for an unlimited marital deduction for estate and gift tax purposes on all property and assets they receive as a gift from a spouse or that they may inherit from a spouse. This means they pay no estate or gift takes on the transferred property or assets from a spouse, regardless of value. A surviving partner of a non-traditional family may have to pay substantial estate or gift taxes on assets they receive from their partner. While there is a $1.0 million exemption, all property interests, including investments, retirement accounts and IRAs, real property and life insurance proceeds are included in determining the amount subject to the tax and this can add up quickly. The tax on inheritance above the $1.0 million exemption begins at a rate of 37% and goes to a maximum rate of 50%.

As mentioned previously, there are many traditional estate tools and these were used before the concept of marital deduction for spouses. These traditional estate tools can still be applied for the benefit of the non-traditional family. These tools are often not considered in a non-traditional family case and they may be unfamiliar to the novice planner. These include: life insurance owned by persons other than the insured, Grantor Retained Interest Trusts (GRITs), valuation freezes, recapitalizations, and split interest purchases and charitable lead and remainder trusts. The benefit and safety of these techniques follows long established principles and are well worth exploring.

Non-traditional family members in a loving relationship that desire to be economically generous and want to provide economic benefit to the survivor of the relationship should also be aware of the state law of wills and inheritance. Most state inheritance laws require that a surviving spouse receives at least a minimum share of a deceased spouse's estate. Unmarried partners are not entitled to anything and may even be displaced from a joint residence, even if that residence is owned by the deceased partner. This can be resolved with a simple will, properly executed that specifies the decedent's wishes, names an appropriate executer and is properly witnessed by those who can attest to the competence and independent mind of the decedent at the time of the execution of the will. If the two partners have separate attorneys, it will further strengthen the validity of the will. Without a will that can withstand a challenge, under the law, only blood relative of the deceased are heirs.

The transfer of the ownership on life insurance, retirement accounts, IRA's and annuities are controlled by a beneficiary designation form and not by will. The unmarried partner is not entitled to receive any share of their deceased partner's retirement account unless specifically designated as the beneficiary. There are also income tax consequences that must be considered with respect to the retirement account assets and as mentioned earlier, the insurance proceeds are subject to estate tax if the insured decedent owned the policy at the time of his or her death. In addition, jointly held assets may provide survivorship or pay on death provisions that will automatically vest ownership in the surviving partner outside of the terms of the decedent's last will and testament.

The good news is that non-traditional families can find ways to minimize tax burdens and simplify the transfer of assets and property during life or after death.

Another important and easily addressed issue is health care and financial decisions that may arise in the event of illness or incompetence. Health care powers of attorney and health care directive are necessary if members of a non-traditional family want their partners to have authority to make medical decisions on their behalf. Financial powers of attorney also allow unmarried partners to make important financial and business decisions on behalf of a partner. All of these documents are readily available in pre-printed statutory form on many web sites, and the North Carolina statutory forms are specifically available at www.ncestateplanning.com.

Those who believe this article may apply to them should plan ahead for the unexpected, address concerns, ask questions, and become informed on options that are available. Once couples have made the decisions to plan for the future, and to address their concerns, they should look for professional advisors who will respect their candor and will provide compassionate services to address the needs in a manner that will respectfully honor the life work and charity of the individual.

R. Daniel Brady practices law in Raleigh and is certified by the North Carolina State Bar as Specialist in Estate Planning and Probate Law.