Financial Planning Tips for Unmarried Couples
November 8, 2007
I have a friend that’s been living with the same women for years but has no plans for getting married. They love each other very much but don’t think marriage is right for them, kind of like Oprah Winfrey, Halle Berry, and George Clooney. Of course my friend and his pseudo-wife aren’t loaded like those celebrities so money has always been a sticky situation for them. I recently forwarded on to him the checklist below from the Financial Planning Association that covers important issues unmarried couples should consider.
Discuss how household expenses will be split
Since you don’t have a legal agreement between you, the first logical step in the money discussion is how you’ll handle household expenses in light of your respective incomes. If you’re setting a lifetime plan, it’s definitely appropriate to discuss your respective salaries and how to budget those household expenses so you’ll have savings to play with.
Talk about debt
The best gift two people can present to each other before they move in together is full disclosure on their respective finances. If one or both partners has significant student, credit, business, mortgage or other debt, those amounts need to be brought into the open and an agreement made on a repayment plan. Start by pulling your latest credit reports –for your free annual series of reports, go to www.annualcreditreport.com.
Take special care when buying property
If you buy a home together, get some advice on how each of you will protect your right of ownership. See if it makes sense to own the property as joint tenants with right of survivorship (JTWROS) or tenants in common. A real estate or estate planning attorney is worth the money here.
Talk about the kids
If one or the both of you are bringing children into the relationship, or if you plan to adopt, you’ll need to cover all the emotional, logistical, legal and money issues associated with new or blended families. You need to know how your partner’s childcare obligations will affect your joint finances and estate plans. Unmarried and same-sex couples need to be particularly circumspect about estate and child custody issues if one partner dies. Depending on state law, the custody of the children may be contested by parents or other close relatives if the correct legal provisions are not in order.
What about retirement?
At whatever point in life you’re entering a relationship, you need to discuss not only how set you are for retirement but what you hope your retirement will be. Talk about assets in your 401(k), IRA and other investment accounts. If one or the both of you haven’t taken any steps to plan for retirement, you’re going to need to change that. Also, if you vary widely in age, it’s particularly wise to ask for advice since one spouse will be retired long before the other.
What is your estate plan?
It’s never too early to think about the possibility that one of you might die suddenly or be incapacitated. Many people wait until they’re married to get wills, durable powers of attorney, health care directives and life insurance/ retirement plan beneficiaries in order, but if you have a specific desire for a non-legal partner to gain custody of your children, your assets or the direction of your business, make time now to talk to an experienced tax professional, estate attorney and most important, an experienced family rights attorney.
This post is produced in association with the Financial Planning Association (FPA), the leadership and advocacy organization connecting those who provide, support and benefit from professional financial planning.
This is actually something that is effecting more and more baby boomers and older generations. People get divorced or spouses pass away and people find someone else later in life. Rather than go through the hassles of merging their estates, they choose not to get married and just live together.
The key principle to make all things work out in any relationship, is to have good communication.
For couple, each of them need to have a totally open communication and talk and discuss just about everything including future plans and actions.
This general tip sure is well-proven. At least, It works for me.