Four Money Tips for Older Unmarried Couples | Capital Group

Retirement Planning


Skipping the Walk Down the Aisle? Four Financial Tips for Unmarried Couples Over 50

More baby boomers are choosing not to tie the knot, often for good reasons. But avoiding marriage means both partners could miss out on some legal rights and benefits. Simple planning can help secure the finances of unwed couples.

Few baby boomers are as rich and famous as Oprah Winfrey, but many of them do have something in common with the superstar and her longtime partner, Stedman Graham: They’re skipping the walk down the aisle. If you want to have and hold both your love and money, you should take steps to organize your finances as a cohabiting couple.

In fact, the number of cohabiting adults (two unmarried people living together who are involved in a relationship) age 50 and older has surged by 75% since 2007 as divorce rates among this age group have spiked, according to a recent survey by Pew Research.

There are some valid reasons for older couples to avoid marriage. Some want to preserve Social Security or other benefits from a former spouse that would be forfeited if they were to remarry. Baby boomers who’ve had messy divorces might be reluctant to merge the assets they’ve accumulated over the years.  Parents could be concerned about protecting their children’s inheritance.

But there are downsides as well. Unwed couples forego many legal rights, tax breaks and other benefits enjoyed by their married peers. For example, if you both live in a house owned by only one partner, the surviving partner has no legal right to stay there if the owner passes away. Other beneficiaries could inherit the home and take possession.

If you’ve decided to move in together, it’s important to take steps to protect your finances as well as the financial well-being of your partner. Here are four money moves unmarried boomer couples should consider:

1. Discuss Your Financial Expectations

Chances are you know each other’s favorite food or political leanings. But do you know each other’s financial habits and goals?

“Take a weekend and have a serious discussion,” says Winnie Sun, founding partner of Sun Group Wealth Partners. “You want to know where you stand, and where your partner stands.”

Among the topics you should address in the money talk:

  • How will you be managing day-to-day expenses?
  • Will you be opening joint accounts, or do you prefer to keep your money separate?
  • Do you expect your partner to take care of you in the event your relationship ends?
  • Where will you live if your partner passes away?

2. Sign a Cohabitation Agreement

When married couples divorce, there are laws to protect the financial and property rights of the dependent spouse, but that’s not the case for unmarried couples.

A cohabitation agreement can determine how you will handle your finances while you’re together, who owns what, and what financial support or sharing of any asset (such as a house) you are entitled to if your relationship ends. Signing this legal contract can help you avoid potential litigation down the road.

3. Rethink Your Retirement Strategy                                

Safeguarding retirement as an unmarried couple requires extra effort. “The transfer of wealth is not as seamless as it is for married couples,” says Michelle Perry Higgins, a financial planner and principal of California Financial Advisors.

It might not be an easy conversation, but you need to know whether you are planning for retirement individually or as a couple. If you don’t expect any assistance from your partner, “you need to plan for retirement as if you’re still single,” Higgins says.

If you’d rather pool your resources, consider the following ideas:

  • Name your partner as the beneficiary of your 401(k),  IRA or other retirement plan.
  • Increase your savings rate to compensate for the fact that your partner will not be receiving your Social Security and other benefits.
  • Think about purchasing life insurance policies, naming each other as the beneficiary.

4. Take Care of Estate Planning

  • Update your will. If you want to leave property to your partner, put it in writing. “In the absence of a will or a trust, an unmarried partner gets nothing” when the other passes, Frederic Hertz, an attorney and co-author of a guide for unmarried, cohabiting couples, notes. 
  • Title assets carefully. Unmarried couples can own assets such as houses or cars as ‘joint tenants with rights of survivorship.’ If one partner dies, the home automatically passes to the surviving owner, even if a will says otherwise.
  • Understand gifting and estate taxes. A husband or wife can inherit unlimited amounts of money or property from a spouse without triggering the estate tax. Unmarried partners cannot. If you are unmarried and give your partner more than $14,000 in gifts per year, this amount counts against your lifetime estate tax exclusion, which for 2017 is $5.49 million for an individual.
  • Get your documents in order. Do you want your partner to make decisions for you if you become incapacitated? Make sure you have a living will, health care proxy and durable financial power of attorney, and name your significant other as your agent.

While most people realize that marriage ensures certain financial rights and obligations, fewer consider the possible financial consequences of cohabitating without a clear financial plan. If you plan to move in with your partner without exchanging "I do's," these tips can help you take the right steps to get your financial house in order.

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