More than 11 million Americans live together as partners without being married. They have their reasons.
Older couples can't afford to sacrifice pension benefits they'd have to give up if they tied that legal knot. Same-sex couples can't get married, at least not in the legal and financial sense. Young couples want to test the whole cohabitation thing before they do marry -- as if that helps. And some others continue to subscribe to the "we-don't-need-a-piece-of-paper" romanticism of the '60s.
Whatever the reason, unmarried couples are all sacrificing something when it comes to money and legal rights. They are sacrificing some pretty juicy tax breaks. They are sacrificing the ease with which married couples can build shared nest eggs, own houses and get insurance coverage. And, they are sacrificing the security of knowing that either partner could take care of the other should the need arise.
Some of those problems can be fixed with extra documentation and planning, according to "Money Without Matrimony," by Sheryl Garrett and Debra Neiman, both of whom have good credentials for writing such a book.
Garrett is a financial planner who specializes in the everyday problems of middle-income clients. She founded a national network of fee-only charge-by-the-hour financial planners. Neiman, a planner who specializes in the needs of unmarried couples and families, founded PridePlanners Association, a network of financial experts serving the gay and lesbian community.
So what do these co-authors have to say? The short version, for unmarried cohabiters is this: Talk a lot and write a lot. You've got to get myriad details nailed down.
Here are some of their planning tips:
Discuss it all early. Ironically, those "romantics" who eschew that "piece of paper" end up having to spend more time talking about money and agreements and responsibilities than their married friends.
There's nothing you can leave to fate on the assumption that the state will take care of it for you. Because it won't. What are you going to do if one of you gets fired? Or disabled? Or rich? Talk first; avoid big problems later.
Get legal documents to cover all of those special situations. In the wake of the Terri Schiavo euthanasia case, you've probably heard most of this: wills, power of attorney, health-care proxies and the like. That's not the end of it, though. It's just the first step you should take.
Consult a financial pro and/or attorney who understands the intricacies of joint property ownership in your state. You'll want to make sure both names are on the big ticket items -- the house, the mortgage, the homeowner's policy -- that you want to share.
Don't automatically merge everything. Separation can be a good thing if one partner has credit problems and the other has a good credit score; if either or both have children; if one is more lawsuit-vulnerable than the other; or, if you're not really certain you're together forever.
Do some smart tax planning. Maybe you don't get the marriage tax relief; you have other options. You can lump deductions by having one partner pay them while the other partner takes the standard deduction.
The lower-earning partner can pay the health-care costs, which are deductible only to the extent they exceed 7.5 percent of a taxpayer's adjusted gross income. If you're going to be chopping up expenses this way, you have to be very careful when you're first taking out the mortgage or incurring the health expenses.
Plan for retirement thoroughly. Partners should make sure they've named each other as IRA and 401(k) beneficiaries, and that they are saving as equally as possible for both partners, even if they have unequal pension plans at work.
Write it all down. Cohabiters should sign a very specific "domestic partnership agreement" spelling out how property is to be owned, inherited and shared, and what would happen should a split occur.
"Don't share any kind of commitment, don't merge any assets, don't share parenting or a household operating account or even buy a chair together, until you have a domestic partnership agreement in place," say Garrett and Neiman.