Creating Long-Term Peace of Mind for Long-Term Unmarried Partners

Q: My domestic partner and I are in a long-term relationship. Our real estate is held in joint tenancy, as are our investment accounts. Each of us is listed as the beneficiary on the other's bank savings account, 401(k) and company life insurance. Our individual wills name the other as sole beneficiary. Are we properly protecting the one from excessive taxes and other such problems upon the death or incapacitation of the other?


A: You've covered most of your bases. Here are a few more things to consider, and these really apply to all couples:

* Durable powers of attorney, for health care and for finances. These documents will give you the legal right to direct your partner's medical care and finances in case of incapacitation. You may have heard horror stories of family members' barring a partner from a companion's sick room or taking over the finances without consent; durable powers of attorney will make it clear whom you want making decisions for you.

* Disability insurance. This applies to any couple. You are far more likely to become disabled than to die during your working years. Even if the two of you can get by on one income, you both should still look for disability insurance that could replace 60% of your pay. I hate to bring this up, but any relationship can falter, and you don't want to be both alone and without any income.

* Living trusts. You might consider a living trust, a device that allows your estate to avoid the probate court process after death and that can ease handling some of the other matters that could come up if one of you becomes incapacitated or if the two of you die at the same time.

* Estate tax planning. Because you are not legally married, you don't have access to one big estate tax break: the marital deduction. The marital deduction allows property to pass tax-free to a spouse after death; estate taxes are postponed until the second spouse dies. Obviously, the break can only be claimed by married couples, and any property not passing to the spouse can be subject to estate taxes.

But another popular method of avoiding estate taxes--bypass trusts--can be used by anyone, and should be considered by people who have substantial estates. ("Substantial" being anything greater than the current estate tax exemption amount, which for the 1999 tax year is $650,000.) You and your partner could leave your property to the other in a bypass trust rather than outright, with each of you naming "final" beneficiaries who will inherit the money when you are both dead. This gives the surviving partner some access to the money while avoiding estate tax on a significant portion of the assets. It's also a way to allow each person to leave his or her part of the estate to different beneficiaries after both partners are dead. Typically, the surviving partner would live off the income, with the principal eventually passing to the final beneficiaries.

If you have enough money that estate taxes are a concern, then use some of it to consult with an estate planning attorney familiar with the needs of unmarried couples. It's a good investment in your peace of mind.

Correcting Incorrect Credit Report

Q: Just out of curiosity, I recently requested a copy of my credit report. I have friends who learned when they applied for a loan that there was a lot of erroneous information on their credit reports and that some of it was next to impossible to get removed. Long story short: There were credit cards from years ago that I cut up and tossed but that still appear as open accounts. I can easily contact the well-known companies. However, there are a couple of Visa and MasterCard accounts from banks that I do not recognize and have no idea where they are located. How can I find their addresses so I can write to them and close the accounts?


A: Good for you for checking your credit report; as you've discovered, the best time to learn its contents is well before you apply for a loan, so that you have plenty of time to dispute incorrect information.

You should know, however, that merely cutting up a credit card does not end your relationship with the creditor. Your ties continue at least until you pay off the debt; you should also send a letter to the creditor stating that you want to close the account and requesting that the creditor report the closure to credit bureaus as "closed by customer request." Otherwise, it could appear that the creditor canceled your account, which could hurt your credit score.

You may have to send your request more than once. Some creditors are incredibly slow about reporting accounts as closed.

If the banks don't have toll-free numbers listed with (800) 555-1212, the government can help. The Federal Deposit Insurance Corp., which insures bank deposits, has a nifty database on its Web site at Click the "bank data" icon, and then use the "institution directory" to look for your lenders. Under the "institution status" field, make sure you enter "all" rather than "active," because it may be that some of those banks have since merged into other banks--and perhaps more than once. In any case, you should be able to get an address for the ultimate buyer so that you can make your request. Consider calling the banks first to find out exactly which department should get your letter; otherwise it could easily get "lost."


Liz Pulliam will answer questions submitted--or inspired--by readers on a variety of financial issues in this column. Questions can be sent to her at or mailed to her in care of Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053.

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