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Protect Your Finances While Living Together
The number of unmarried couples who choose to live together continues to grow each year. Many couples are choosing to delay or not marry at all. In fact, over 46% of U.S. adults are single, including those who are widowed, divorced, or never married.
Those that choose to cohabit have a few financial risks and financial planning considerations that married couples do not. For example, unmarried partners do not automatically inherit each other’s assets, as married couples do, nor can they rely on the divorce process to determine a fair division of assets if they break up. So, while the relationship with your partner may provide all the social and emotional benefits of matrimony, the lack of a marriage license can bar cohabitating partners from many of the automatic legal and financial protections married couples enjoy.
However, with some planning and paperwork, you can overcome many of the financial risks of cohabitation. One of the simplest, but most effective, things you can do is to spell out your financial responsibilities in the form of a cohabitation agreement. This contract can set rules for a couple’s living arrangement. Couples that wish to put such an agreement in place should consult an attorney as the requirements and enforceability varies from state to state.
Experts recommend getting to know something about your partner’s credit history and habits before taking on financial liabilities together. Also, be aware that getting and using credit as an unmarried couple can be risky. A break-up could leave one partner making the payments on a joint debt.
If you buy a house together, be careful in choosing how to hold title to the property. One way, a surviving partner inherits their partner’s share of the property; another way, the deceased partner’s next of kin inherits it. Many real estate-related issues, besides inheritance, can come up during or at the end of a relationship. Draw up a co-ownership agreement that answers key questions and protects both partners.
All couples who wish to have a long-term relationship should create retirement and estate plans. Unmarried couples have no automatic legal claims on or rights to each other’s assets or property, so planning is crucial.
There are many books, websites, and other resources that can help unmarried partners educate themselves about the financial issues of cohabitation. Couples should consider consulting a tax adviser, attorney, or estate planner before making any decision that could have major legal or tax implications.
A financial counselor from CVF Credit Union also can help. Contact us today at (734) 432-0212 to schedule an appointment today.