Financial Planning for Unmarried Couples

For many couples, a committed partnership doesn't involve marriage. If you've found your person and a wedding isn't part of your plans, you should still take time to make important decisions together about estate planning, medical care, and division of property.

Here are five financial tips to help unmarried couples manage money and plan for the future.

1. Talk openly about estate planning.

If you’re squeamish about the topic of death, you’re not alone. But it’s never too early to think about end-of-life financial planning in case the unexpected happens.

For married couples, surviving spouses may automatically inherit a deceased partner’s property. However, for unmarried couples, a lack of estate plans can leave the surviving partner in a legal gray area.

If you want your partner to make financial decisions on your behalf if you’re ever unable to do so, designate them as your financial power of attorney. To ensure they inherit your nest egg or get to stay in a home you share, spell out those wishes in your will. A trusted estate planning attorney can help you button up plans and put them in writing.

2. Make plans for medical decision-making.

You may wish to designate your partner as your medical power of attorney, granting them the authority to make medical decisions on your behalf. If you don’t put this in writing, important healthcare decisions could one day fall to your next of kin — meaning your closest living relative — instead of your partner.

You can appoint your power of attorney by creating an advance directive, a legal document that dictates your wishes for medical care. The rules and regulations for enacting an advance directive vary from state to state; a local attorney can help you create one.

3. Designate your partner as beneficiary.

Unmarried couples may want to designate each other as beneficiaries on retirement accounts like 401(k)s and IRAs, in addition to life insurance policies, investment accounts, and standard bank accounts — don't forget checking and savings accounts.

If one of you passes away, the account balance or death benefit will be passed to your beneficiary. This can help the surviving partner avoid a lengthy probate process.

4. Look into domestic partnership registration.

In some states and municipalities, you can register a domestic partnership to extend certain rights — such as health insurance and medical visitation — to your partner. If you’re interested in registering a domestic partnership, an attorney can help you explore your options.
In many states, domestic partnership registration was phased out in the wake of the 2015 U.S. Supreme Court ruling requiring states to issue same-sex marriage licenses.

5. Create a cohabitation agreement.

When a marriage ends, property is split evenly between partners or divided according to stipulations in a prenup. But what if an unmarried couple parts ways after years of financial entanglement?

Establishing a cohabitation agreement can help you spell out how money and assets will be divvied up if your relationship ends. This can be useful in a situation where an unmarried couple purchases a home together but only one person’s name is on the mortgage. In that case, you could use a cohabitation agreement to give the other person equity in the home or designate who pays for home maintenance expenses.

Talking with your partner about worst-case scenarios may feel uncomfortable, but it’s an important step toward protecting each other and planning for the future. For more financial advice, check out these smart financial moves for every age and stage in life.