Planning for Cohabiting Couples

Fewer young people are taking the trip down the aisle, opting instead to cohabitate.  This is creating a variety of unique planning concerns. 

Data from the Pew Research Center showed that in 2012, 20 percent of American adults over 25 had never been married., compared to just 9 percent in 1960. Pew also pointed out that not all of these individuals are single: About 24 percent of Americans aged 25 to 34 who have never been married are currently cohabitating with a partner.  While the IRS may deem them single, they really are not. 

For some people, it can pay to be single as high-earners will be subject to higher taxes upon getting hitched.  Being single in the eyes of the law makes sense for a couple who might prefer to keep assets separate.  Furthermore, if you are not married to your long-term partner, and have a child from a previous relationship, the partner’s assets will not count for financial aid purposes. 

Despite some of the incentives to be single, clients who cohabitate would be incorrect to believe they have protection under state law.  Domestic partnership agreements can help address some of the thorny issues around what happens if there is a split.  Another important protection measure is to ensure the committed couple addresses each other in documents for power of attorney and health care proxies.  Asset titling and beneficiary designations are also important. 

See Darla Mercado, Declining Marriage Rates Present A Planning Conundrum for Long-Term Couples, Investment News, Feb. 9, 2015.