As marriage rates are on the decline, cohabitation relationships are on the increase. However, I suspect many unmarried couples haven't considered the financial ramifications of living together.
This is a mistake because living together couples do not enjoy the same protections and benefits as married couples enjoy.
Many young couples who have separated have faced the "this is yours, this is mine" problem with things like books, music, furniture, and even pets. But living together as you age (and hopefully get richer) can pose additional challenges.
It is essential to remember that when it comes to money, the law does not fully recognize relationships that are not officially documented on paper. You need to know some important things before deciding to live with your partner.
Be careful when buying a house.
Unmarried couples can decide not only to live together but also to buy their own house. It can be a big move, but be aware of potential issues.
Remember this: the house belongs to the person whose name appears on the registered deed. It doesn't matter who paid the mortgage or what verbal agreements were made. So make sure both parties are named in the deed.
The two basic ways of sharing the title with others are joint ownership with the right of survivorship and tenancy in common. The difference is that with a right of survivorship, your interest in the property is automatically transferred to the other owner upon death. With tenancy in common, this is not the case.
If you both apply for the mortgage, you are both responsible for paying, even after you go your separate ways. If both couples are on the deed as joint owners, but only one spouse is on the mortgage, the one responsible for the mortgage remains liable even though that person has moved out and moved on.
Another scenario: John already owns a house, so Sara moves in. Because she earns more than John, Sarah pays off the mortgage every month.
So is Sarah entitled to some of the equity she creates by paying John's mortgage? No. In the absence of a legal document to the contrary, this is John's home and property.
So if you're considering buying a home together or taking on the responsibilities of someone who already owns a home, go into the transaction with your eyes open.
Make sure you have a will.
It's bad enough when couples don't have a will, especially when it's so easy to do. But even without a will, the law does not disappoint the surviving spouse, thanks to another document: a marriage certificate.
However, if there is no paper, as far as the law is concerned, you are a stranger, even if you have been sharing a bed for 20 years.
If you are married and die without a will, your estate will ultimately go to your spouse because, by law, your spouse is your next of kin. If you are single and die without a will, your estate still goes to your next of kin, but that is not your partner. If you don't like the idea of a father, brother, or distant relative inheriting everything, then make a will.
Another thing to consider: If you're wealthy, say, with over $5 million in assets, you may have estate tax issues that wealthy married people don't. So it's a good idea to talk to an estate attorney.
Beware of health care taxes.
Many large companies and government agencies will extend health insurance coverage to unmarried couples. While your employer may not care if you're married or not, the IRS does.
When married, the IRS does not tax your health benefits or your spouse's benefits under your plan. But if you provide medical care to your partner, the part that applies to that person may be taxed at your expense.
In other words, if John covers Sara as a concubine under his employer-sponsored health plan, Uncle Sam could tax John for all the benefits provided to Sara.
Why? Federal tax law excludes fringe benefits spouses receive from taxes, but Uncle Sam does not recognize domestic partners. So if John and Sara's employers are paying for their health coverage, they better keep their policies separate.
If John has coverage and Sara doesn't, they'll have to do the math: Will John's additional costs exceed what it would cost Sara to get a private health insurance policy? The right path will depend on John's tax bracket and Sara's health insurance cost.
Look into advanced health care.
If either spouse has a medical emergency, unless documented otherwise, the other spouse has no legal right to receive information or make decisions about care.
The solution to this is for each of you to name the other on an advanced health policy that allows each to legally make decisions if the other is disabled. It also allows hospitals to share usually confidential information reserved for spouses.
As proof, these guidelines are not hard to find. Your county hospital or health department can provide you with the form, or you can download one online.
Find out if common law marriage is recognized in your state
There is a situation where a cohabiting couple can enjoy marriage rights without being hitched the traditional way: they can claim a common-law marriage, which is recognized by law in many states.
But you are mistaken if you think a common-law marriage is created simply by living together. According to the law, the affected couples are required to do certain things, including:
Living together for a significant period (not defined in any state).
File as a couple, which means you share a last name, call each other husband and wife and file a joint tax return.
Remember that the burden of proving you are a common-law married will fall on you; it is not automatic. Once you have successfully proven it, you will have the privileges of couples, including the privilege of legally divorcing if you break up.
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THANKS FOR VISITING.
Dennis Jao