The unmarried couples number but who live together did increase by 88 per cent between the year 1990 & the year 2007. This number continues growing with twelve per cent of the couples who currently live together being unmarried & most couples that finally get married opt to live together at first. Perhaps the most interesting fact is the manner in which the population of the cohabitating unmarried couples has become diverse. With that diversity though, the couples tend to share some habits (at least one) in common: they rarely make arrangements for their future financially as compared to the married couples.
As a matter of fact, the cohabitating unmarried couples usually face some financial issues & decisions with regards to personal finance management. Below are some of the 3 personal financial issues that the unmarried couples face nowadays:
1. Joint or Individual Accounts & Asset Issues
Many financial experts recommend that during the initial early stages of your relationship when unmarried couples initially opt to live together it is a good idea to keep your assets individual to avoid cases of property disputes thereafter. Individual accounts might be even more helpful for debt such as loans from a money lender or the credit cards. Finally, if both names appear on any account, both of you possess legal right for these assets that are in the account that might be a good or awful thing based on the current situation. This too is the case for the jointly titled assets such as vehicles or even houses. It might particularly be tempting to mix your assets & move ahead to open a joint account together when the unmarried couples have joint expenses such as rent, or groceries. It is advisable to keep assets individual till you make full commitment to your relationship.
But below are some tips on how to manage joint finances as you keep majority of your cash & assets initially separate:
• Maintain individual checking accounts mostly for your individually earned money, but you can open a joint checking account where both of you contribute equally in order to pay for the common expenses.
• Maintain different checking accounts, however, take them to a similar bank with the free online banking characteristics which makes money transfers to one another’s accounts simple.
• Own the least possible property jointly. You should avoid contributing cash to purchase a major asset, like houses or cars that are held only in your partner’s name. Though you can make some financial contributions, that asset is not yours legally. In case an asset belongs to both of you, the asset is supposed to have both names.
• When you opt to purchase a house jointly, you should settle between either “joint ownership having survivorship rights “or the “tenants in common” option. For joint ownership, in case one person dies, the property is going to be inherited by the other person entirely. This makes property transfer very simple, though this is capable of causing some serious estate tax impacts in case you fail to keep good records. For the tenants in common option, every one of you owns the property partially & in case if you pass away, your share is going to be directed to whomever that you specified in the will or to the next of kin in case you die having no will.
• Some individuals permit themselves to be financially dependent fully on the other partner in such a manner that they might be devastated financially in case the relationship ends. In case you & your partner together make a decision which significantly affects your own financial situation (such as leaving your job), ensure that both of you have deeply thought through any financial effect of your decision & have a legal agreement which outlines these details.
• As your relationship grows & perhaps the income & assets also increase, you might need to hire a lawyer to lay out an agreement such as domestic partner which addresses what happens to the assets in case the relationship ends.
2. Issues Related to Income Tax
From the federal income tax view, unmarried couples might make out well as compared to the married couples. Although there are tax benefits of being married certainly, as some of the married couples enjoy what is mostly termed as the tax bonus for marriage, others still suffer the tax penalty for marriage. It’s rumored that some of the married couples might pay a “penalty” of 12% from their shared income in case they get themselves at the wrong side of factors such as whether the couple have kids together, how different their incomes are, & whether they break down their deductions.
In case you are part of the unmarried couples, you continue filing your income taxes individually, so ensure to benefit fully from the great deductions & opportunities to reduce the tax burden:
• In case you and your partner live together, but are yet unmarried, you might similarly claim the “head of household” status of filing in case you are supporting a dependent. The filing status permits you to use the earned income credit in case your income is below the threshold & permits you to go for the child & dependent care credits.
• When you pool money to the share household costs, this is termed as non-taxable resource sharing. Ensure to check with the accountant on how to benefit from this fact.
3. Health & the Financial Issues Related to Health
Other financial issues for unmarried couples are basically related to health, but they have severe financial impacts for the two parties. Experts in personal finance know that estate planning & documents for medical surrogate are important for every person, not forgetting unmarried couples & the domestic partners. The question of the manner in which specific decisions are going to be made & the manner in which assets are going to be handled once a partner dies or develops a disability should be answered. So as to prepare for such situations together, the cohabitating couples are required to consult an attorney & prepare the documents below:
• A long lasting power of attorney permits your partner to decide – financially or otherwise based on the document’s language – on your behalf in case you are to do it yourself.
• A health-care proxy (or long lasting power of attorney meant for health care) permits a person who is not a relative to make the medical decisions on your behalf in case you are incapacitated.
In reality, there are so many other considerations that you & your accomplice might need to prepare based on personal situations such as life insurance, designated beneficiaries after retirement and child custody. For some advice on the manner in which the married & unmarried couples should deal with their financial issues in an effective manner, consider the three tips above. See more here at https://credithubcapital.sg