Have you been with your significant other for years and have decided not to marry? It’s a decision increasing in popularity for those in their 30’s and even for those in their 50’s. Just because a couple isn’t married doesn’t mean they are not committed. Unmarried couples who live together still share dreams of how they envision their lifestyle. They still regard each other as their “spouse” but lack the official marriage license. Some make the decision not to marry because of previous marriages. Others make the decision not to marry because they don’t see the necessity of it. Whatever the reason, couples who are not married but committed need to discuss money up front. If you are not legally married, you are not financially protected if your significant other becomes ill, leaves or dies. However, it is important to note some states recognize “common law marriage.” Check your state laws if you are not married but in a committed relationship.
If you live in a state which does not recognize common law marriage, then make it a priority to discuss these five items with your significant other:
1 – Titling of Assets
If you make major purchases together (for example, a home), will both names be on the title? What about the mortgage? What if one person has significantly higher income than the other person? These discussions are important in order to understand what would happen if one person ends the relationship or dies. If you are not legally married and your name is not on the title, will you be evicted from your home if your significant other dies or leaves? If your name is on the mortgage and you have lesser income, will you become fully responsible for the mortgage if your significant other dies or leaves? Living in a state which recognizes common law marriage may help as long as you’ve lived together during the timeframe specified in the state law.
2- HIPPA Release Form and Health Care Proxy
In 1996, Congress created the Health Insurance Portability and Accountability Act (HIPAA) to protect the privacy of your health information. Unless you have a signed HIPAA release form, you cannot access health care information for another adult. A health care proxy will allow you to make health care decisions in the event your significant other is incapable of making those decisions. When there’s a medical emergency, the last thing you want to be told is that you are not authorized to receive information or make medical decisions regarding your significant other.
3- Financial Power of Attorney
A financial power of attorney addresses making financial decisions in the event your significant other is incapable of making those decisions. This power can be as limited as you want or broad enough to cover all financial matters. It’s important especially if checking accounts are held separately and paying bills have been divided.
4- Estate planning
If assets (homes, cars, investment accounts, etc.) do not include your name, who will inherit those assets if your significant other dies? How will expenses be paid especially if you earn lesser income? Are you the primary beneficiary on retirement assets? Will your significant other’s pension pay you if you are not legally married? It’s never too early to have these conversations.
5- Tax Efficiency
Unmarried couples do not have the benefit of paying lower taxes with “married filing jointly” designation. Filing as “single” results with a higher tax payment. For this reason, it’s important to discuss who claims charitable donations, mortgage interest deductions and other tax deductions. It’s also important to look at tax efficient investments.
If you’re not married but in a committed relationship, finances take a priority. Because you are not protected by the benefits of being legally married, it’s important to discuss upfront your financial situation and what happens if one person becomes ill, leaves or dies. Work with a CFP® professional, CPA and estate planning attorney when addressing these issues. All three professionals bring important knowledge as you develop a balanced approach for your relationship.
ABOUT THE AUTHOR:
Niv Persaud, CFP®, CDFA™, CRPC®, is the Founder of Transition Planning & Guidance, LLC. Life is more than money. It’s about living the lifestyle you want and can afford. For that reason, Niv consults with clients on money, life and work. Her approach capitalizes on techniques she learned throughout her career, including as a management consultant, executive recruiter and financial adviser. Her services include spending plan, financial plan, divorce financial review, life strategy and professional progression. Niv actively gives back to her community through her volunteer efforts. She believes in living life to the fullest by cherishing friendships, enjoying the beauty of nature and laughing often — even at herself. Her favorite quote is by Erma Bombeck, “When I stand before God at the end of my life, I would hope that I would not have a single bit of talent left and could say ‘I used everything you gave me’.”