If you’re thinking about co-habiting, or currently co-habiting, or thinking about getting married in the future, it is important to discuss financial matters with your partner. It may not be your favorite topic, especially if it’s becoming the root cause of arguments, but living with someone for an indefinite period will involve making decisions involving money. And whether you’re deciding individually or as a couple, it is likely that both of you will be affected by the decisions you will make.
Things such as budgeting, asset ownership, and investments are crucial to your life as a couple living together. But some unmarried couples tend not to plan for their financial futures. How is this going to affect their relationship?
Bank Accounts and Asset Issues
It is advised for unmarried couples to own separate bank accounts and assets, at least in the early stages of co-habiting, to avoid property disputes when things go downhill. But if you’ve already reached a level of commitment that indicates that you see yourself living together for the rest of your lives, whether or not that means marriage, then owning joint assets should be a safe bet. It has the advantages of sharing expenses like groceries, rent, utilities, etc.
But owning separate assets doesn’t mean that you’re going to be free from arguments. To avoid fights about money, communication is key. Make your expectations clear and set responsibilities for each other. It’s important to know your partner’s values regarding money, especially that you’re sharing a life with them.
Making a domestic partnership agreement will help in clearly defining your expectations, rights, and responsibilities. It is a contract that states the legal and financial rights of each partner, along with their individual responsibilities and a plan on how they’re going to manage assets, bank accounts, and what should happen when the relationship ends. Doing this may make it seem like you’re considering a future break-up, but make it clear that you’re not; in fact, discussing money matters seriously shows that you deeply care for your partner.
One disadvantage of being unmarried is not being automatically permitted to make decisions for your partner when they fall seriously ill unless you have a durable power of attorney document. This allows you to make decisions for each other when one is unable to, either from severe illness or death. Having a health-care proxy will help as well when major decisions about your partner’s health have to be made.
Estate planning, which consists of a will and other end-of-life arrangements, should also be included in your domestic partnership agreement. This would also legally allow your partner to make health care and financial decisions for you when you become incapacitated.
Another disadvantage of being unmarried is the limitations regarding retirement plans. For this reason, you and your partner should save for your retirement separately, making sure that your terms are fair for one another. If you’re making your partner a beneficiary for your insurance policies, state it clearly in your plans.
Speaking of insurance, if you and your partner have shared assets and liabilities, it is strongly advised that you invest in a life insurance policy to protect each other financially when one of you passes away unexpectedly.
Other Things to Consider
While not all co-habiting couples are planning to marry in the future, getting married definitely earns you more benefits and legal rights. That said, if you and your partner have discussed marriage with a positive outlook, then perhaps you should pop the question soon. What’s the point of waiting if you already share a harmonious life together?
If you own separate savings accounts, then you can easily budget and save for a high-end diamond engagement ring. If buying anything pricey is disapproved by your partner, it’s not the time to worry about that. For now, all that matters is that you want to spend a lifetime with them.