The Massachusetts court decision allowing gay and lesbian marriages to be recognized has captured a great deal of media attention. From a financial planning perspective, this issue raises the question of planning for non-traditional couples and families.

Our culture is a diverse mixture of traditional “Father Knows Best” households and households made up of unmarried heterosexuals, gay and lesbian partners, and single parents.

Non-traditional households are not accorded the same rights under law as traditional households. Most, but not all, of these rights can be replicated with proper planning.

The most basic planning for non-traditional families should be an estate plan. Estate plans should consist of a minimum of three documents for each partner: a will, durable power of attorney for health matters and a durable power of attorney for financial affairs.

A will is necessary to ensure that all property of the decedent goes to the proper recipient. Without a will, the state determines where a decedent’s property goes, generally excluding a partner, unlike a traditional marriage where property would automatically go to the surviving spouse.

If privacy and property control are issues, partners may want to consider setting up revocable trusts to own their respective shares of property. This allows property to pass inside the trust and avoids a potentially nasty probate contest.

Durable power of attorney for health care enables your designated agent to look after your health care needs if you are incapacitated, including the simple right to visit you in the hospital or the more complex right to make life-ending decisions. With durable power of attorney for financial matters, your designated agent is also authorized to manage your financial affairs under the same circumstances. Without predetermining these powers, the courts can choose an agent or custodian you might not have selected and often at a higher cost.

Traditional retirement planning easily allows retirement assets to pass from one spouse to the other, tax-free for tax-deferred retirement accounts. That is not the case with non-traditional couples. The surviving partner, even if properly named as the beneficiary on the decedent’s retirement account, does not have the option of a tax-free rollover to his/her own IRA. He/she must plan to begin distributions from inherited retirement plans no later than the end of the year following the year of the death.

Surviving partners have two choices: take the money out within five years or set up a lifetime minimum distribution plan. In either case, no early withdrawal penalties will apply, but state and federal taxes will apply on all tax-deferred accounts.

This raises another issue for non-traditional planning. If one partner works and contributes the majority of the household’s savings into his/her retirement account, and the partners decide to terminate their relationship, there is no easy way nor legal requirement to divide these assets. The same is true for other assets acquired by the couple but bearing the legal title of only one partner.

Therefore, next to the will and durable powers documents, it is important that the couple have a written partnership agreement in place that will provide clarity to the relationship and specifically spell out how property will be handled in the event of a dissolution of the relationship.

Single-parent households face many of these same problems. Proper wills with guardianship language for minor children and durable powers of attorney are a must. Careful thought should be given to retirement planning and distribution of retirement accounts at death. Single parents should also have a life insurance plan in place where the beneficiary of the plan is a trust within the will. This will help ensure that minor children are properly looked after in the event of the parent’s death.

Bruce Fenton is a financial consultant, a writer, and the Managing Director of Atlantic Financial Inc. Bruce welcomes inquiries, comments, and questions. He can be reached by contacting The Fenton Report.