Financial Resource Center


Cohabiting Couples and Their Finances

by Danielle Dresden / January 20th, 2021

The number of "cohabiting couples" continues to grow, according to Pew Research Center. Currently, it’s now more common to have lived with a partner than to have married. Although the reasons for a couple's living arrangements vary as much as their love stories, most share a common characteristic—they live in legal limbo. Rights and responsibilities aren't automatically assigned when couples move in together, so it's important to consider how cohabiting affects your finances.

Along with the romance, Debra A. Neiman, certified financial planner and co-author of Money Without Matrimony: The Unmarried Couple's Guide to Financial Security, recommends that cohabiting couples start thinking about each other's money personalities. Are you a spender or a saver? “Often savers are attracted to spenders," Neiman notes. "You also see the artist and the actuary. One is grounded in logic. The other doesn't have a clue, doesn't want to have a clue." But couples can still find common ground.
Maybe you do need a piece of paper

Whether or not they're planning marriage, cohabiting couples are shifting from individual to shared expenses. Neiman says, "There are shared liabilities and responsibilities involved with living together. You become dependent on someone the minute you co-sign a lease." Establishing financial agreements can prevent arguments, protect your assets and credit rating, and strengthen your relationship. The key financial issues for cohabiters are:

  • Day-to-day expenses—This includes rent, utilities, food, entertainment, and more. Do you split costs down the middle? Does one pay more because she or he makes more? 
  • Separate or combined—Some experts recommend avoiding joint checking accounts or credit cards to protect individual finances and credit.
  • Property brought into the relationship—Does what was once "yours" become "ours"?
  • Property acquired during the relationship—Whether it's a toaster or a house, spell out ownership and maintenance, especially with items like cars or houses.
  • When it's over—It's hard to imagine endings during beautiful beginnings, but it will help, whether the end of life or love terminates your relationship. Specifying who gets what or lives where can ease breakups. Establishing health-care power of attorney and durable power of attorney for financial management will give you the legal authority to care for each other in emergencies. Writing a will helps you provide for your loved ones.

Writing it down is recommended, but you can make your "cohabitation agreement" as formal, or not, as you choose. Couples with ex-spouses, children, and more assets may need an attorney.

No matter how long you live together, your partner is legally a stranger to you, despite what Miller calls "the myth of common law marriage." The notion that cohabiting couples acquire legal standing after seven years is an urban legend.

As of 2020, only 8 states recognize common law marriage, and they require couples to file joint tax returns, call themselves married, and more. To get the financial protection you normally get through marriage, you will need to do some work. Experts recommend drafting a cohabitation agreement, durable power of attorney for health care and financial management, and a will.

Cohabiters still can face challenges, especially with real estate and insurance. A common problem develops when one partner owns a house and the other moves in. Since only one person's name is on the deed, who gets the mortgage deduction? If the homeowner dies without a will, the surviving partner can get kicked out.
Ultimately, these decisions are personal, but keeping in mind the practical aspects can help you make your choices that work for both of you.


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