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Living Together but Not Married? 5 Tips

Nearly half of Americans in their 30s and 40s have lived together in a romantic relationship. While that may make for a happy couple, it can lead to money misery.

By Stacy Johnson

NEW YORK (MoneyTalksNews) —Here's some sobering information:

According to a March 2012 analysis of census data conducted for USA Today, about one in 15 unmarried American heterosexual adults were in live-in relationships.

In fact, nearly half of U.S. adults in their 30s and 40s have lived together in a romantic relationship outside of marriage.

I call this "sobering" not because I object, but because I suspect that many unmarried couples haven't considered the financial ramifications of living together. That's a mistake because they're not afforded all of the same protections and advantages that married couples have.

Every young couple that breaks up has faced the issue of "this is yours, that's mine" – from books and music to pets and furniture. But living together as you get older (and hopefully wealthier) can pose additional challenges.

I did a TV news story offering advice for cohabitating couples. Check it out, then read on for more information.

It's essential to remember, whether gay or straight: When it comes to money, the law doesn't recognize relationships not documented with paper.

How to buy half a house

With mortgage rates near historic lows and home prices rising, unmarried couples may decide to not only move in together, but buy their own place. This could be a great move, but be aware of potential problems.

Keep in mind what I said above: The house belongs to the person whose name appears on the legally recorded deed. It doesn't matter what verbal agreements were made or who paid the mortgage. So make sure both parties are named on the deed.

The two basic ways of taking title with other people are joint tenancy with right of survivorship and tenancy in common. The difference is that with right of survivorship, your interest in the property automatically transfers to the other owner when you die. With tenancy in common, it doesn't.

Also keep this in mind: If you both apply for the mortgage, you're both responsible for paying it — even after you break up. Also, if both parties are on the deed as owners, but only one is on the mortgage, the one responsible for the mortgage remains responsible, even if that person has moved out and moved on.

Another common scenario: John already owns a house, then Jane moves in and, because she makes more than John, proceeds to make the monthly mortgage payments. Is Jane then entitled to any of the equity she's creating by paying down John's mortgage? No. Absent a legal document to the contrary, it's John's house and his equity.

So, if you're thinking of buying a house together – or taking on the responsibilities of someone who already owns a home – go into the transaction with your eyes open. The steps are simple:

  • Think it through.
  • Talk it out.
  • Draw it up.
  • Have a lawyer look it over, then have it notarized or recorded.
  • Live together for a significant period of time (not defined in any state).
  • Hold themselves out as a married couple — i.e., share a last name, refer to each other as husband and wife, and file a joint tax return.
  • Intend to be married.

Where there's a will, there's a way

It's bad enough when married couples don't have a will, especially when it's so easy to do. (See "How Do I Get a Will on the Cheap?") But even without a will, the law won't leave a surviving spouse high and dry, because of another piece of paper — a marriage certificate. If there's no paper, as far as the law is concerned, you're strangers even if you've shared a bed for 20 years.

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If you're married and die without a will, your estate will eventually go to your spouse because, according to the law, your spouse is your next of kin. If you're unmarried and die without a will, your estate will still go to your next of kin – not to your partner. If you don't relish the idea of a parent, a sibling or some distant uncle inheriting everything, get a will.

Something else to consider: If you're rich – say, with assets exceeding $5 million – you could have estate tax issues wealthy married people don't. So talking to an estate attorney is a good idea.

A taxing health care plan

Many big companies and government agencies extend health insurance coverage to unmarried couples. While it may not matter to your employer if you're hitched, however, it does to the IRS.

When you're married, the IRS doesn't tax your health benefits, nor does it tax the benefits your spouse receives under your plan. But if you're providing your domestic partner with health care benefits, the portion applying to them could be taxable to you. In other words, if John covers Jane as a domestic partner under his employer-sponsored health plan, John could be taxed by Uncle Sam for any benefit extended to Jane.

Why? Federal tax law specifically excludes employee benefits received by spouses from taxation, but Uncle Sam doesn't recognize domestic partners. Thus, if John's and Jane's employers both pay for their health coverage, they're better off keeping them separate.

If John has coverage and Jane doesn't, they have to make a calculation: Do John's extra taxes exceed what it would cost Jane to get a private health insurance policy? The correct path will depend on John's tax bracket and Jane's cost of health insurance.

But there's something else to consider. Suppose Jane develops a health condition? If she's on John's group policy through his workplace, she'll continue to be insured. But if they split up and John cancels her coverage, she could be denied individual insurance on her own because she has a pre-existing condition. (Luckily that won't be the case in 2014 when health care reform prohibits denial of insurance because of health history.)

In case of medical emergency

If one partner has a medical emergency, absent paper to the contrary, the other has no legal right to information or to make decisions about care.

The solution to this problem is an advance health care directive, which allows each of you to legally make decisions if the other is incapacitated. It also allows hospitals to share information usually reserved for spouses. Like a will, these directives aren't hard to get. Your hospital or county health department can give you the form, or you can download one online.

Marriage without paper

There is one situation where a heterosexual couple living together can enjoy the rights of marriage without getting hitched the traditional way: They can claim a common law marriage — which is recognized by law in 15 states.

But if you think a common law marriage is created simply by living together, you're wrong. According to, these couples must:

Keep in mind that the burden of proving you're a common law married couple will fall to you – it's not automatic. Once you've proved it, you'll then have the privileges of married couples – including the privilege of going through a legal divorce if you break up.

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