Living together: What it means for your personal finances
Moving in with your partner can change a lot of things in your life, including your personal finances. Here we break down what moves you can take to make sure that you are financially prepared for whatever developments in your relationship may arise.
- Marriage involves a legally defined set of rights and obligations, but unmarried cohabitation does not. This can result in unexpected and unwanted consequences in the event of a breakup, unless some planning is done. Consider keeping your assets separate, especially in the early stages of your cohabitation.
Many people find it a good idea to keep separate checking accounts, even if they also use a joint account to pay household expenses. It's wise to draw up an agreement that addresses each partner's financial responsibilities. This will ensure that both partners are on the same page. Try to avoid contributing money to the purchase of assets like homes or cars, unless it's formally titled in both of your names.
It's probably a bad idea to buy a house together unless you have a degree of commitment on par with marriage. If the two of you decide to buy a house together, in most cases, fairness will dictate that you both should pay the mortgage. There are two very different options for ownership-- joint ownership, with rights of survivorship, and tenants in common.
Joint ownership with rights of survivorship is typical for married couples and means that if one of you dies, the other automatically becomes the sole owner of the property, regardless of whatever the deceased partner's will might say. Being tenants in common means that each of you owns half of the house. With either form of ownership, it's crucial for both partners to have a written agreement.
Unlike married couples, unmarried couples can't file joint tax returns. If you and your partner have bought a house together with a mortgage loan, you will face the issue of who will get to claim the deductions for interest and property taxes. To do this you must itemize deductions. One option is to split the deductions in half.
The other option is to allow one partner to claim all the deductions. If you're going with the second option, and one partner earn significantly more, allow that person to claim the deductions, since they will benefit more from extra tax savings. If you live with your partner, you may also claim head of household filing status if you support a child and take child independent care credits. Your partner can also be claimed as a dependent, provided you support most or all of their needs. Stay financially fit, friends.