From
Your Perspective:
Financial planning for nontraditional couples
Financial challenges
for nontraditional couples
Nontraditional couples may face some specific challenges in managing their finances.
Taxation. Unmarried
couples have to negotiate income, estate, and gift
tax systems that treat the partners as singles. This
means that financial transactions are treated as
occurring between individuals and may be taxable
as income or
gifts.
To avoid owing more tax than you anticipated, you
may have to structure the ways you exchange property
and share expenses carefully.
Retirement planning. Retirement
plans are set up to make it easier for families to
be financially secure in retirement — and to
extend that security to a surviving spouse. However,
since you’re not married, you may not be eligible
to pass along your government or employer benefits
to your partner if you should die first. This means
you may need to look for other ways to support the
survivor in retirement.
Estate
planning. The
inheritance system privileges family relationships,
which can make it more difficult for you to structure
your estate plan in a way that allows you to ensure
that your partner will have your
assets after
you’re gone. To handle their estates,
married couples can generally rely on a will, and
if their combined assets are large enough to be vulnerable
to
estate
taxes,
perhaps
trusts
established
in each spouse’s name will to provide lifetime
income for the survivor before passing the exempt amount — currently
$2 million each — to their heirs. In contrast,
you, as an unmarried couple, may need to be careful
to use alternate methods to direct where your property
goes after you die if your estates are larger than
the exempt amount.
Other unions
Domestic partnership and civil union laws can ease some of
the financial complexities for unmarried couples, by giving
them some of the benefits of marriage. But the laws vary
from state to state and from employer to employer. They
also change from time to time. If you’re in a nontraditional
relationship, it’s vital that you pay attention to
changes in the law, since it could mean you’ll be
able to — or need to — make changes in your
financial arrangements.
