Four smart planning tips for couples who live together

When you move in together, one of the best benefits is splitting the mortgage or the rent, not to mention all the other household expenses. But finances also are one of the most common reasons for breaking up, whether married or unmarried.

While married couples are legally protected when it comes to how finances are distributed after a breakup, unmarried couples often are not. One way to protect yourself is with a cohabitation agreement, also known as a domestic partner agreement, which addresses important financial issues that should be discussed by you and your partner.

Some critical topics covered in this contract are ownership of assets, management of expenses, co-parenting arrangements, and home ownership scenarios. You can work with an advisor to determine what financial issues the agreement should cover, and then a lawyer can help you prepare the document. There are also do-it-yourself templates available online. 

While every couple needs to plan for unanticipated events, unmarried partners face unique challenges. When a married spouse passes away without a written will in place, assets typically go to the surviving husband or wife.

But the laws controlling this vary by state and don’t apply to unmarried couples. This means a surviving partner has no claim to his or her partner’s assets, which could go to the closest family member, known as the “next of kin.”

It’s particularly important for unmarried couples to draw up a will (or other estate-planning documents) to make sure that the right person inherits any property in question.

In addition to a will, unmarried couples should establish a health care directive and durable power of attorney. Essentially, these documents enable your partner to make critical decisions on your behalf if needed. A health care directive applies to critical health care decisions, while a durable power of attorney applies to critical financial and legal decisions. 

Did you know that spouses may be entitled to monthly Social Security survivor benefits, as long as they are age 60 or older and have been married for at least nine months?² That means the surviving spouse can collect their spouse’s Social Security check after they pass away.

Unmarried couples, however, don’t have access to these benefits. One way to address that money gap is to purchase the right life insurance coverage, and make sure your partner is the beneficiary. A good policy can provide much-needed cash to pay for expenses after an income earner is gone. How much is enough? Explore guidelines about selecting the right amount of coverage. 

Retirement investments, like a 401(k), are typically passed along to the surviving spouse. Even when a married spouse doesn’t name a beneficiary for his or her employer-sponsored retirement plan, the funds usually go to the surviving spouse, simply by default.

But you can’t count on that happening if you aren’t married. That’s why it's especially important for unmarried partners to name a beneficiary for a retirement, bank or investment account. 

Whether it’s writing a cohabitation agreement, planning for the unexpected, using life insurance for financial protection, or choosing the right beneficiary, unmarried partners can take steps to better protect each other for whatever comes their way. 

Talk to your employer to find out more about the benefits that you have  through work and how they might help you and your partner.