Financial Implications of Singles Living Together
1. Single Couples and Mingling Assets
- Some financial experts feel that in the early stages of a relationship where two single people are living together, it's best to keep their assets separate, to avoid property disputes later.
- Keep separate checking accounts.
- Own as little property as possible jointly. Never contribute money to the purchase of a major asset, such as a house or a car, which is held only
in the name of your partner. If an asset belongs to both of you, it should be in both of your names.
- Contribute equally (or proportionately, depending on your respective salaries) to a shared checking account to pay for common expenses.
As the relationship grows and your income and assets begin to increase, you may want to hire a family lawyer to draw up an agreement that addresses what will happen to your assets if your relationship ends.
If you decide to buy a house together, you'll have to decide between "joint ownership with rights of survivorship" or "tenants in common." Under joint ownership, if one of you dies, the other inherits the property. This makes the transfer of property simple, but can have serious estate tax implications if you don't keep proper records. Under tenants in common, you each own half of the home and if you die, your share will go to whoever you specify in your will, or to your next of kin if you die without a will.
- Some people allow themselves to become so financially dependent on their partner that they could be financially devastated if the relationship ended. If your partner encourages you to quit your job and promises to take care of you, get that promise in a legally enforceable written agreement.
2. Single Couples and Taxes
- From a federal income tax perspective, single couples often make out better than married couples, because they avoid the so-called "marriage tax penalty" (although this penalty is being phased out over the next several years).
- If you live with your single partner, you may also claim "head of household" filing status if you support a dependent, which allows you to take the earned income credit if your income is under the threshold, and allows you to take child and dependent care credits.
- If you pool your money to share household expenses, this is usually regarded as a non-taxable sharing of resources.
3. Single Couples and Health and Financial Issues
Other money issues for single couples include:
- A durable power of attorney that allows your partner to make financial decisions for you if you're unable to make them yourself.
- A health-care proxy (or durable power of attorney for health care), which allows a non-relative to make medical decisions for you if you're incapacitated.
- A will to provide for your partner in the event of your death.
For advice on how married and unmarried couples can deal effectively with financial issues, check out "Couples and Money: A Couples' Guide, Updated for the New Millennium."
|Some people allow themselves to become so financially dependent on their partner that they could be financially devastated if the relationship ended.|