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11 Financial Documents Unmarried Couples Should Know About

Teresa Mears

For 32 years, Stieg Larsson and Eva Gabrielsson shared a life and a home. She says she even helped the celebrated Swedish author research his best-selling trilogy of novels that started with "The Girl With the Dragon Tattoo."

But because Larsson died in 2004 without a will, none of the profits from the books went to Gabrielsson, nor does she control the literary estate. If you die without a will, Swedish law, like American law, leaves everything to your next of kin. But the law, not you, decides who next of kin is.

This case is a reminder that unmarried couples, regardless of sexual orientation or relationship length, are classified as unrelated individuals in the eyes of the law, leaving both parties vulnerable to the loss of homes they helped pay for, assets they helped accumulate and even children they helped raise.

Estate planning and medical surrogate documents are essential for everyone, but they're particularly important for unmarried couples. The sudden death or disability of one partner could cut the other out of critical decisions and jeopardize ownership of shared property and other belongings.

[See: How to Talk to Millennials About Money .]

"The law assumes decisions should be made and inheritances pass to next of kin," says Elizabeth F. Schwartz, a lawyer who practices what she calls "modern family law" in Miami Beach, Fla. "Gay or straight, the last thing you would ever want is for your wishes not to be followed in the case of disability or death."

About 6.7 million couples live together without being married, more than 90 percent of which are heterosexual, according to the U.S. Census Bureau. Couples have all kinds of reasons for not getting married, from philosophy to loss of pensions, alimony or government benefits.

"If you choose not to marry or the law prevents you from marrying ... it's of critical importance that you make your intentions known," says Schwartz, one of the lawyers in the case challenging Florida's ban on same-sex marriage. "The consequences for not doing that can be grave."

This type of planning is not just for the rich. When you die, your estate is anything you own, from trinkets to your best-selling novels to your 15-year-old used car. Plus, there are situations short of death when unmarried couples may need documents spelling out their rights. Those include the disability or illness of one partner, requiring someone else to make financial and medical decisions. The equivalent of a prenuptial agreement -- known as a domestic partnership agreement or living together agreement -- can also be useful if a couple joins their financial lives and then splits.

The rights of unmarried couples differ from state to state. Some states recognize common-law marriage and others don't, for example. Married same-sex couples face particular challenges because currently only 17 states and the District of Columbia have embraced marriage equality. That means the rights marriage grants may not apply if these couples move to or even visit states that have not legalized gay marriage.

[Read: The Biggest Financial Issues for Same-Sex Couples.]

While you can download documents online and write up a will on notebook paper -- and those are better than nothing -- Schwartz advises unmarried couples to consult a lawyer who specializes in estate planning and family law.

"I always hammer home how complicated this patchwork of rights are," she says. "I've spent a whole lot of time and unnecessary client money trying to fix these things."

Plus, if your life circumstances change, you need to update your documents.

Here are 11 documents and provisions unmarried couples should consider to protect themselves from financial disaster.

A will. This outlines what you would like done with your property after your death, and it designates someone who will be in charge of carrying out those wishes.

A living trust. Property held in a trust passes to the heirs without going through probate, which is a court procedure that freezes assets while it is underway. Trusts save money as well as public scrutiny, since wills become public records and trusts do not. A trust can also be used to handle the affairs of someone who is not competent.

Beneficiary designations on retirement accounts. Property in these accounts passes directly to beneficiaries without going through probate. If you haven't updated your beneficiaries since you signed up for your company's 401(k) plan years ago, make sure you still want those beneficiaries to inherit.

Durable power of attorney. This gives the other party the right to make decisions and sign documents on your behalf. Not all couples will want this, but you might consider it if you're undergoing major surgery or have a terminal illness.

Designation of health care surrogate. This lets medical personnel know whom you would like to make decisions if you're unable to make them yourself. Since the Health Insurance Portability and Accountability Act of 1996 went into effect, medical providers have been hesitant to discuss health issues with anyone but the patient, unless the patient grants advance permission.

Advance directive or living will. This details what measures you want taken if you are in a vegetative state or unlikely to recover from major injuries.

Properly titled property. Most couples, married and unmarried, hold real estate as "joint tenants with right of survivorship," which means that if one party dies, the other inherits the rest of the home without going through probate. But tax issues may complicate the issue for unmarried couples, so it's best to consult with a lawyer about how to handle jointly owned property -- or property owned by one person who wants the other to inherit it.

[See: How to Manage Money in Your 20s.]

Funeral wishes. Funeral directors may be hesitant to allow unmarried partners to make funeral arrangements, especially if the family disagrees. A directive outlining who should make arrangements and what the deceased would like can avert such problems.

Life insurance. If there are no children involved and neither partner depends on the other financially, couples might think life insurance is unnecessary. But the surviving partner may be unable to pay the mortgage, estate taxes or other expenses on his or her own, which is why it's an important consideration.

A domestic partner agreement. This is similar to a prenuptial agreement since it outlines how assets and income will be handled during the relationship and what happens to joint assets if the relationship ends.

Child custody. Schwartz encourages same-sex couples to do second-parent adoptions in states that allow it. With this method of adoption, the nonbiological parent is granted equal rights. In other families, the biological parent may need a document giving the stepparent the right to authorize medical treatment for the child or even give permission for field trips. Parents also need documents spelling out who should care for their children if they die or become disabled.

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