Unwed couples can get financial protection

It used to be that love and marriage went together. These days, that's not necessarily the case.

The 2000 U.S. Census found that nearly 5.5 million households, or about one in 20, consisted of unmarried partners. They range from young couples living together before marriage to elderly couples living together for convenience, and about 10 percent are gay couples.

While state and federal laws include many financial protections for traditional couples, such as estate tax exemptions, there are often no such provisions for unmarried couples. That makes it imperative that they take steps to ensure their joint financial security, financial advisers say.

"Unmarried couples can get their hands on most of those protections, but they have to do some extra work," said Dorian Solot, co-author with her partner Marshall Miller of the book "Unmarried to Each Other."

Some issues identical

When it comes to basic issues, such as how to cover day-to-day living expenses, nontraditional couples face the same issues traditional couples do, said Kathleen Gurney, chief executive of the Financial Psychology Corp. in Sarasota, Fla.

Take the question of paying bills. Some unmarried couples, like their married counterparts, will opt for separate checking accounts, then divide expenses evenly or pay them based on how much each earns, she said. They also may opt for separate credit cards.

"In some cases, they don't want responsibility for the other's credit cards -- or the debt," Gurney said.

When it comes to purchasing property together or deciding how to deal with crises like disability or death, unmarried couples must come up with joint legal solutions, and that requires talking about tough issues.

"The earlier the better," Gurney said. "It's too late if they break up, it's too late if one dies."

Solot and her partner, who are both 29, have been happily unmarried for 10 years. Five years ago, they founded the Alternatives to Marriage Project, a national organization for unmarrieds based in Boston.

Couples who envision a long-term relationship without marriage should seriously consider a written financial agreement, known variously as a cohabitation agreement or domestic partner agreement or relationship contract, Solot said. They may want to seek legal help in drafting it, especially if they intend to buy property or if one partner is financially dependent on the other.

"It's similar to a prenup," Solot said, referring to prenuptial financial pacts that some couples draft before marriage. "It may sound unromantic, but the time to do it is when you're in love and things are going great."

She also recommends unmarried couples consider securing a durable power of attorney for financial matters and a health care proxy for medical issues "so you can protect each other as you want to."

Must consider worst cases

Ginita Wall, a San Diego financial planner who is a director of the Women's Institute for Financial Education, said preparing for the possibility of separation or death are critical for unmarrieds' financial security.

"I tell my clients, 'Let's look at the worst-case scenario,'" she said. "What do you own? How does the money flow? How can you protect your partner? How can you provide for children or relatives you care about?"

In some cases, it's as simple as making sure the right names are on the beneficiary forms for Individual Retirement Accounts and 401(k) plans, she said. At other times it may require retitling assets.

For example, if a couple holds title to a home as tenants in common and one dies, the partner's share goes to whomever is named in a will -- not automatically to the surviving partner. If they are joint tenants with right of survivorship, the property automatically passes from one to the other.

Wills and sometimes trusts can be critical, especially if either or both of the partners have children, Wall said. The basics of estate planning are outlined at the GE Center for Financial Learning, www. finaciallearning.com. Wall and Gurney are both advisers to the site.

"A lot of people equate estate planning with tax planning, but that's not what it's about," Wall said. "It's about how those left behind will be taken care of and how the things you leave behind will be distributed."

She added: "It's difficult to have to think about these things whether you're married or not, but it's important."

------

On the Net

www.unmarried.org

www.financialpsychology.com

www.wife.org