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Financial Planning Checklist for Unmarried Couples

This article was originally published online prior to 2004 and the author is unknown. This version was last edited and updated on January 25, 2015 by Tony Novak, CPA, MBA, MT

Editors note: Prior to 6/26/2013 most of the financial planning concepts in this article also applied to married same sex couples because the federal government did not recognize same sex marriages. The Supreme Court has now determined that legally married same sex couples will be treated the same as  other married couples with regard to the issues addressed in this financial planning article.

Powers of attorney

If one partner becomes incapacitated, the other will need a written power of attorney to handle the ailing partner' s finances. Each partner also will need a health-care power of attorney to make medical decisions for an incapacitated partner. Because hospitals sometimes allow only one visitor include specific language in the health-care document giving the power of attorney the right to visit and to determine who gets to visit.

Will

Without a will a deceased person's assets are distributed exactly as prescribed under state law. State laws are not likely to distribute assets in a manner that the unmarried couple intended. The solution is simple: have an executed will.

Letter of instruction

Disputes can arise at death between a surviving partner and family members about burial, and particularly about cremation. In a letter of instruction, clients can list their wishes and name someone to make funeral decisions on their behalf.

Account beneficiaries

Individual retirement accounts, life-insurance policies, 401(k) accounts and even some stock options present opportunities for clients to name beneficiaries. To avoid confusion and ensure assets go to the desired heir, make sure beneficiary designations are in sync with the will and property titles. Make sure to be aware that beneficiaries named on an account or policy override the provisions in a will.

Cohabitation agreement

Married partners have divorce laws to protect their interests on how assets are divided in a breakup. Unmarried couples do not automatically have this legal protection. A cohabitation or domestic partnership agreement, though, can spell out how assets will be split when a couple parts, whether mediation will be sought, or if one partner will receive financial support. The purpose of a domestic-partnership agreement is to create the rules of divorce. Since marital laws do not apply in most states, a private contract may be created to replicate similar protections. 

Estate planning

A husband or wife can leave unlimited assets free of federal estate tax to the surviving spouse. Unmarried individuals, on the other hand, can leave only a limited amount to a partner or other heirs tax-free. States also levy estate taxes or inheritance taxes. New jersey has both estate taxes and inheritance taxes. Those with significant assets will need to do some estate planning to avoid these potentially hefty taxes. That may include buying life insurance to pay potential estate or inheritance taxes, experts say.

Titling property

For unmarried couples, property ownership basically will be determined by how assets are titled. Partners need to weigh the pros and cons of how they title their property. Joint tenants with rights of survivorship, for instance, means that when one partner dies, the other automatically becomes sole owner. That' s one advantage. A drawback for someone with a high net worth is that at death the full value of the house will be considered part of the federal taxable estate.

Retirement planning

Because many unmarried couples won' t be eligible for survivor' s benefits from Social Security or traditional pensions, they must set aside additional assets for retirement.

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