Four smart planning tips for couples who live together

Nearly 9 million US households are made up of couples who live together.¹ While living together offers many benefits, couples, however, may not have the same legal rights and protections as married couples. That means unmarried couples who are living together may want to take steps to help ensure they’re protected and provided for in the event of a breakup — or anything else that may come along.

1. Write a cohabitation agreement

When you move in together, one of the best benefits is splitting the mortgage or the rent, not to mention all the other household expenses. But finances also are one of the most common reasons for breaking up, whether married or unmarried.

While married couples are often legally protected when it comes to how finances are distributed after a breakup, unmarried couples often are not. One way to help protect yourself is with a cohabitation agreement, also known as a domestic partner agreement, which addresses important financial issues that should be discussed by you and your partner.

Some critical topics covered in this contract are ownership of assets, management of expenses, co-parenting arrangements, and home ownership scenarios. You can work with a financial professional to determine what financial issues the agreement should cover, and then a lawyer can help you prepare the document. There are also do-it-yourself templates available online.

2. Plan for the unexpected

While every couple should consider planning for unanticipated events, unmarried partners face unique challenges. When a married spouse passes away without a written will in place, assets typically go to the surviving husband or wife.

But the laws controlling this often vary by state and don’t apply to unmarried couples. This means a surviving partner has no claim to his or her partner’s assets, which could go to the closest family member, known as the “next of kin.”

It’s particularly important for unmarried couples to draw up a will (or other estate-planning documents) to make sure that the right person inherits any property in question.

In addition to a will, unmarried couples should consider establishing a health care directive and durable power of attorney. Essentially, these documents enable your partner to make critical decisions on your behalf if needed. A health care directive applies to critical health care decisions, while a durable power of attorney applies to critical financial and legal decisions.

3. Fill the social security gap with life insurance

Did you know that spouses may be entitled to monthly Social Security survivor benefits, as long as they are age 60 or older and have been married for at least nine months?² That means the surviving spouse can collect their spouse’s Social Security check after they pass away.

Unmarried couples, however, don’t have access to these benefits. One way to address that money gap is to purchase the right life insurance coverage, and make sure your partner is the beneficiary. A good policy can provide a death benefit for much-needed cash to pay for expenses after an income earner is gone.

4. Designate a retirement beneficiary

Retirement investments, like a 401(k), are typically passed along to the surviving spouse. Even when a married spouse doesn’t name a beneficiary for his or her employer-sponsored retirement plan, the funds usually go to the surviving spouse, simply by default.

But you can’t count on that happening if you aren’t married. That’s why it's especially important for unmarried partners to consider naming a beneficiary for a retirement, bank, or investment account.

Whether it’s writing a cohabitation agreement, planning for the unexpected, using life insurance to help provide financial protection, or choosing the right beneficiary, unmarried partners can take steps to better protect each other for whatever comes their way.

Talk to your employer to find out more about the benefits that you have through work and how they might help you and your partner.