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Cohabitating But Not Married? It Still Pays To Plan For Your Financial Future

It is becoming more and more common for couples to cohabitate without marrying. According to the Census Bureau, the rate of cohabitating couple households has tripled since 1996, and the number of cohabitating unmarried couples with children has jumped 162 percent in the same time period.

Unmarried cohabitating couples have a few more financial hurdles to jump due to their unmarried status. Why? Because marriage affords over 1,000 federal benefits and protections for the couple, meaning that there are some financial struggles that unmarried couples have to face that married couples do not. For example, spouses can share health insurance. Selling a home allows married parties to both reap the benefits of the capital gains exemption. Married couples can transfer unlimited assets between one another with no tax penalties. Surviving spouses can claim an estate tax exemption. These are just a few examples.

So what should you do if you are cohabitating, in the event that the two of you break up? Without marriage, is there anything you can do to make the process of breaking up easier on you financially? Actually, yes there is.

Draft A Cohabitation Agreement

A legal cohabitation agreement would be, basically, a prenup without the wedding ring. With your partner and the assistance of a mediator or family law attorney, draft a document that details how to divide assets and how financial support will work after a split. Additionally, discuss other legal documents that you might need in case of emergency; for example, a will naming your partner as beneficiary for assets you wish to transfer to him or her and an advance directive giving your partner medical power of attorney.

Whether you are married or not, a family law attorney can help you prepare for your financial future with your partner.