Stepping Out of Legal Limbo: Key Points for Cohabiters/ December 19th, 2011
You're living together, but you're not roommates. You're a whole lot more than friends, but you're not married. What in the world are you? You're part of a growing trend. The percentage of 30- to 44-year-olds living as "cohabiting couples" has more than doubled since the mid '90s, according to a 2011 Pew Research Center study. Most adults today have lived with an "opposite sex unmarried partner" at some point, according to the National Survey of Family Growth. These numbers, reflecting changes in American attitudes toward marriage and sex, have been linked to economic pressures, late-life couples avoiding marriage, and evolving notions about how we pair up. 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; it's important to consider how cohabiting affects your finances.
Savers, spenders, artists, and actuariesAlong with the romance, Debra A. Neiman, certified financial planner and co-author of "
Financial agreements can help prevent arguments, protect your credit, and strengthen relationships."You can discuss your financial goals," she says. "Couples will talk about whether they want kids or pets or if they want to live in the city or country, but what goes unsaid often has to do with finances." Marshall Miller, co-author of "
Maybe you do need a piece of paperWhether or not they're planning marriage, Miller says 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. "It gives you a chance to say, 'What are our shared values?' " Miller says. 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? "I'm a big believer in there's no 'right way,' " Neiman says. "Just be mindful of who is paying for what."
Many unmarried couples live in legal limbo.
- 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.
It's up to youNo 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.
A practical approach can help you implement personal choices.Only 15 states recognize common law marriage, and they require couples to file joint tax returns, call themselves married, and more. "The good news is almost all the financial protections that come from being married, you can still have as an unmarried couple," Miller says. "You just have to work a little." Miller recommends drafting a cohabitation agreement, durable power of attorney for health care and financial management, and a will.