More and more people are living together before getting married and in some cases, they decide to simply live together without getting married. While everyone is entitled to live the life they see fit, living together unmarried can bring up some unintended financial issues. This post will highlight the more common issues and what the both of you can do to limit your risks.
5 Potential Issues Living Together Unmarried
#1. Bills, Bills, Bills
When it comes to paying bills, how are you going to handle this? When married, most people combine finances and pay everything jointly using a budget. This isn’t the case with those who are unmarried.
The easiest solution is to open up a joint account that you both fund to pay the monthly bills. How you divide up the allocation ñ whether it is 50/50 or proportional ñ is up to you. But by having a dedicated account, you both will know how you are covering the bills and you will both feel at ease that one person isn’t contributing more than the other.
#2. Health Care
When you are married, either spouse can make health decisions for the other without issue. They also can get access to medical records. When you are unmarried, you don’t have this option. In fact, even if you know what your partner does and does not want done, you cannot let the doctors know as you are not authorized to tell them.
You overcome this by creating a health care power of attorney. This is a legal document you have an attorney draft up and gives either partner the power to act on the other’s behalf in a medical emergency.
#3. Assets Upon Death
If you are unmarried and you pass away without a will, what happens to your estate and belongings? They will go to your next of kin. This means your partner has no claim. If you were married, your spouse would have a claim.
Therefore it is of utmost importance to draft a will and specifically name your partner in it. While the odds of you passing away at a young age are slim, the price to draft a will is small compared to the benefits.
#4. Buying A House
When buying a house together, you want to make sure it is titled as joint tenants with right of survivorship. This allows your partner to inherit the house legally.
If you were to title the house as tenants in common, half of the house will go to your next of kin. So you partner will own 50% and your next of kin will own the other 50% and one party will have to buy the other party out.
You also want to talk about what happens should your relationship end. Does one person get the house and pays the other partner half the difference? Do you sell and split the proceeds?
A house is a large financial commitment and selling soon after buying could leave you underwater and owing more than you bought it for, so think long and hard before buying.
#5. Not Having A Plan
More and more people are completing a relationship agreement when living together unmarried. This document spells out the solutions to the potential issues I listed above as well as others. Things like who pays the credit cards, groceries and who owns what.
Not having a plan makes the breakup even more of a headache. If you have a relationship agreement in place, it will make dividing up the belongings much easier and you two can more easily go your separate ways.
While living together unmarried is a great way to test a relationship, it can lead to some unintended headaches should you breakup or even if one of you gets into a serious accident.
Take the time to go through this list and talk things over so that you can focus on growing and enriching your relationship and not fighting over who pays for what. Talking things over now will make the process of moving on easier should the relationship end as well.