More and more unmarried couples are living together and merging their finances.
Since 1985, the number of unmarried couples living together in the US has more than doubled. The merging of finances between unmarried parties offers unique money situations. And many are less likely to plan for the future as married couples do.
Recently, a client came to me asking for suggestions on merging finances before marriage. She was worried that the finances merged now would not be split equally in the case of a separation. I suggested, as she is getting married next month, that she not co-sign anything before marriage. I also suggested she consider a pre-nuptial agreement. These agreements aren't only for the wealthy, they are for anyone marrying someone with debt.
In the early stages of a relationship, it is best to keep assets separate. Don't add each other to credit cards, co-sign for loans or share property of any sort. This will save you from small claims court if you break up. If you make a loan to the other person, make sure they sign a promissory note acknowledging the loan. Many judges will otherwise see the loan as a gift in a relationship situation.
You should also maintain separate checking accounts. Don't contribute money to the purchase of any asset that is only in your partner's name. If you are far enough in your relationship to buy, for example, a house together, you should have it in both of your names.
You should each contribute money proportionately to a shared checking for common expenses such as groceries and lawn care. The amount you give to this account depends on your respective salaries. If I make 60% of the total household income and my partner makes 40%, we each put that percent of our salary in the joint account.
You might want to consider having a lawyer draw up an agreement that addresses what will happen to your assets if the relationship ends. This is a good thing to do well before you ever have any troubles. Consider it a pre-nup without the nup.
If you decide to buy a house together, make sure that it is titled correctly. You will either have to title it “joint ownership with rights of survivorship" or “tenants in common. " Check with a lawyer as to which titleship of the property is best for your situation.
Don't become financially dependent on your partner. If you break up, what will you do? If your partner asks you to quit your job and stay home, make sure you get it in writing, legally and enforceably, that you will be taken care of.
When you decide to live together out of marriage, there are a lot of legal and financial issues to consider. Most of us don't even think of them when we decide to move in with someone - we are too in love. But we often think about them when the relationship turns sour. And then its often too late. Do things wisely and sit and discuss your finances with your partner. Let your partner know that you aren't just looking out for yourself, you are looking out for your future together.
Martin Lukac (http://www.MartinLukac.com ), represents http://www.RateEmpire.com and http://www.1AmericanFinancial.com , a finance web-company specializing in real estate/mortgage market. We specialize in daily updates, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies!