Hundreds of federal and state laws pertain to married couples, covering everything from taxes and Social Security benefits to child custody, real estate and inheritance. But if you are not legally married to your partner, there are many potential gaps that could leave one or both of you financially vulnerable. Consider these steps to make sure that you’re both protected…


If unmarried partners split up and the parting isn’t amicable, disputes can turn into costly court battles. Avoid that risk by preparing two documents…

A property agreement should list jointly and separately owned nonfinancial assets and contain provisions for how they will be divided if the relationship ends.

Real estate is the most important item in a property agreement. Unlike a spouse, a nonspouse partner can’t keep living in a shared home without title. Make sure that your agreement provides for what happens to shared real estate if you and your partner separate.

Example: Amanda and Tim, both retired and affluent, decide that they want to build a house and live together. Before moving in, they write a property agreement stipulating that if they break up, Amanda will buy out Tim so that she can continue to live in the house.

You don’t need to list every pair of socks, but in addition to assets with high monetary value, such as a home or car, you should include any possessions with significant sentimental value, such as music collections and picture albums.

A cohabitation agreement should spell out each partner’s financial rights and obligations, addressing what you want to happen if the relationship ends. An unmarried partner has no statutory right to financial support, even if one person has been supporting the other for years or if one person has given up a career to raise a family. Cohabitation contracts protect the dependent partner from being left financially destitute. For example, you might include in the agreement that you’re setting up an investment account whose income would go to your partner if you should break up.

Caution: Almost all states enforce written contracts between unmarried partners. However, in Georgia, Illinois and Louisiana, the courts may hold that living together without matrimony is “immoral,” so contracts between unmarried partners aren’t valid. Also, in most states, common-law marriage does not entitle couples to the same rights as those who are married, so you still need to protect yourselves.

A simple contract drawn up by a lawyer typically costs $800 to $1,500, depending on where you live.


Unmarried couples do have some advantages over married couples. Partners aren’t liable for each other’s debts unless they have cosigned on a loan, such as a mortgage or car financing. And unless they share assets, their individual credit scores stay separate. Because your credit score largely determines how much interest you have to pay on mortgages and other consumer loans, it’s important to keep the number high. (A good FICO score is 720 or above.)

What to do: Keep your bank, credit card, investment and retirement accounts separate. However, maintaining a joint checking account for household bills is OK.

Also, if you want your assets to go to your partner when you die, consider a payable-on-death bank or investment account. It would let you keep financial assets in your own name and under your control while you’re alive, then transfer them to your partner when you die while avoiding the lengthy court process called probate. The beneficiary must bring a certified copy of the death certificate to the bank or brokerage.


Unless you make legal provisions for your partner in case of your death, your property will go by default to close relatives — children or grandchildren, parents or siblings, nieces or nephews. If you have no such relatives, it will go to the state.

What to do: Update both of your wills as soon as you make a long-term commitment to each other. A simple will should cost around $400 for a lawyer to prepare, or you can prepare a basic, state-specific will online at for $59.95 (except in Louisiana).

Better: Set up a living trust. Trusts cost about twice as much as wills to establish, but they have three advantages. They are not subject to probate, which saves you money and protects your privacy because they are not examined in court… they can address what happens not just after you die but in the event that you become disabled… and they allow you to write in restrictions regarding where assets should go when your partner dies.

Example: Jonathan sets up a living trust leaving his entire net worth, which includes inherited wealth, to his partner, Barbara, during her lifetime. The trust stipulates that when Barbara dies, any remaining assets pass to Jonathan’s nephew and niece.

Note that beneficiary designations on retirement accounts take precedence over wills. If you want your partner to inherit your IRA and 401(k) assets, be sure to name him/her as the beneficiary on each account.


By filing their tax returns as singles, unmarried partners sometimes can claim more individual deductions and pay less income tax than if they filed as a couple (the so-called marriage penalty). If there’s a big disparity between two partners’ incomes, the low-earning partner will pay less in taxes if the couple files singly — because he/she won’t be pulled up into the partner’s higher bracket.

Married people, however, have the advantage when it comes to gift and estate taxes. They can give or bequeath each other unlimited assets without incurring taxes. In contrast, unmarried partners are subject to the same taxes on gifting to each other as total strangers are. As of 2010, they may give each other (and anyone else) $13,000 per year without having to report it. Amounts above that count against the $1 million lifetime exemption from any tax on gifts.

Example: You add your partner’s name to the title of your house, the equivalent of giving your partner half the house’s value. If your partner’s share is worth $100,000, it reduces your $1 million lifetime exemption by $87,000 ($100,000 minus $13,000).


If you want your partner to make medical decisions for you should you be unable to make them for yourself, you need a legal document that says so. Otherwise, under state law, the duty will fall to a family member. Some hospitals even keep nonspouse partners out of emergency rooms and intensive care units on the grounds that they have no legal right to be there.

What to do: Write a health-care directive that specifies your own wishes regarding medical interventions and end-of-life care. Then designate your partner as the person to carry out those wishes in a document called a durable power of attorney for health care (or health-care proxy). You can get these forms, which vary from state to state, for free in hospitals. In some states, the two documents are combined as a single form.

Important: Name a backup agent in case you and your partner are in an accident together.


Unlike married couples, unmarried partners aren’t entitled to each other’s Social Security benefits when one partner dies. Older unmarried couples should consider buying life insurance as a replacement for Social Security income, especially if one partner is financially dependent on the other, and even to cover funeral costs. Most insurance companies will accept the designation of an unmarried partner as the beneficiary, but some may take issue with it. Check in advance, and choose another insurer if there is a problem.

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