Financial considerations for unmarried couples

A growing number of couples are choosing to build their lives together without getting married. While that arrangement is increasingly common, it can present some unique challenges when it comes to financial and wealth planning.

Unmarried couples don’t have many of the automatic protections that married couples enjoy. For example, unmarried partners generally don’t have automatic rights to each other’s assets if one partner dies. Health care or end-of-life decisions may go to the person’s next of kin rather than an unmarried partner. An unmarried partner is also not eligible for Social Security spousal or survivor benefits.

Retirement accounts can present additional considerations. A nonspouse beneficiary who inherits an IRA has fewer options and less flexibility than a surviving spouse. That makes it especially important for unmarried couples to understand the rules that apply to them and plan accordingly.

So where should you begin?

Start by talking openly about your finances. Discuss spending, saving, investing, financial values and the legacy you each hope to leave. Decide whether you’ll handle finances jointly or separately, or use a combination of the two. From there, talk about long-term financial goals and how you’ll handle unexpected expenses.

Unmarried couples may want to name each other in wills, trusts and powers of attorney so their wishes are clearly documented. Valuable assets can also be titled jointly with rights of survivorship. Couples who own real property together may want to consider a property co-ownership agreement that documents each person’s contributions.

Beneficiary designations are another important consideration. Each partner needs to name the other as a beneficiary if they want their retirement assets to pass to that person. Those designations can generally be changed as circumstances evolve.

Health care planning shouldn’t be overlooked, either. Living wills or advance directives can document each partner’s wishes for medical care. Written consent may also be necessary for unmarried partners to share personal health records. Durable and financial powers of attorney can provide additional authority to discuss medical care, insurance coverage and other important matters.

Some couples may also consider a cohabitation agreement that establishes how assets and shared debts would be handled if the relationship ended. These agreements do not override applicable state or federal laws, but they can help establish expectations between partners.

None of these considerations mean unmarried couples should necessarily get married. Rather, the goal is to understand how being married or unmarried can affect your financial rights and protections so you can make informed decisions.

All relationships take work, regardless of marital status. Some of the most important work couples can do is to carefully discuss and plan their financial future together and revisit that plan as their lives and circumstances change.

Thomas M. Dowling, CFA, CFP®, CIMA® is the Head of Wealth Management at Alliance Global Partners of the Lowcountry on Hilton Head. He can be reached at infohh@allianceg.com or (843) 420-1993.