WASHINGTON — Love can happen at any age, and with the rise of “gray divorce,” it’s happening again more frequently for those over age 50. But instead of walking down the aisle another time, many older couples are opting to live together.
While we think of cohabitors as being younger, recent studies suggest an increasing number of older adults are moving in with their romantic partners. The Pew Research Center said the number of cohabiting adults ages 50 and older grew by 75 percent from 2007 to 2016 — the fastest rate of growth of any age group over that time period.
When older couples decide to live together, the financial implications are very different from for younger couples. When you factor in the additional dynamics created by children and grandchildren from previous marriages, health considerations as couples age and the wealth each person brings to the relationship, there’s a lot to consider. We created a six-question Living Together After 50 Quiz to give you a better idea of the questions you should ask yourself and your partner before sharing the same address.
Carefully planning your finances before moving in with a partner, and continuing to address finances throughout cohabitation, is critical to protecting your wealth for the long term.
Start by talking about finances
Whether you’re married, dating or thinking about living together, talking about your finances on a regular basis should be a priority in your romantic relationship. But one of the challenges in the early stages of cohabitation is that in many couples, each person has little knowledge of each other’s overall financial situation — simple details, such as your total wealth or debt levels, simply aren’t discussed. This can make planning for current expenses, as well as saving for future larger expenditures, more difficult.
Ideally, you should start having money conversations with your partner before you move in together. While you may have a general sense of someone’s financial situation, you should know more specific details about their finances before agreeing to live together.
At a minimum, you should have a clear understanding of basic financial matters such as income sources, outstanding debt and obligations to former spouses or family members. This information can help you make decisions about how to split household expenses, such as utilities and food, and when deciding how to split discretionary expenses like entertainment and travel.
Think twice before commingling accounts
Getting a joint credit card or joint bank account may seem like a simpler way to address expenses you share with your partner, but we recommend, at least in the early stages of a relationship, that you not commingle any assets or credit, especially if your partner has a history of prior credit problems or an unstable work history — doing so can lead to you into debt that you may not want or claims on your assets with implications long after a relationship has ended. A better idea is to keep accounts separate and have a written agreement on exactly how costs are shared.
Alimony and pensions: Read the fine print
While your motivation to live together may be based on an assumption that sharing a roof will improve your financial security, in several specific situations moving in with your partner can be a detriment to your wealth. One example is when one or both partners are receiving some form of pension benefits. In many cases, it’s remarriage that affects pension, military, or veterans’ benefits, but you’ll still want to confirm with your pension plan administrators that having a live-in partner won’t affect your benefits.
While it used to be only remarriage that triggered the end of alimony, many divorce agreements now stipulate that alimony ceases in the case of cohabitation. So, if you or your partner depend on any of these benefits to cover living expenses, you’ll first want to fully understand any potential loss of benefits if you cohabitate, especially if you intend to get married in the future.
Consider a “no-nup”
To protect personal assets, you’ll also want to understand the laws regarding common-law marriage in your state. At your death, the state could render your cohabitation a common-law marriage, and your partner might have a claim on your assets. This could be an unpleasant surprise for your heirs.
If your state does recognize common-law marriage, you’ll want to seek legal help and develop a cohabitation agreement with your partner. Often dubbed a “no-nup,” these agreements state that you don’t intend to marry, and that you mutually agree not to make any property claims against each other should you split up or should one of you die. A no-nup can cover other agreements about your living situation, such as how expenses will be split and any other assumptions considered important enough to document in writing.
Keep good financial records
Another way to help protect assets acquired during the relationship is to keep major purchases separate, with documentation on the source of the money for each purchase. This is critical because if you are unmarried, you don’t have legal protection or a claim to joint assets if you don’t have documentation.
You could also handle this by documenting the amount each person contributed to the purchase and an agreement (or a section in the no-nup) as to who takes the property in case of a split.
Since your home is often the largest asset either you or your partner has, having clear agreements upfront regarding housing costs will go a long way toward protecting that valuable asset. Questions to answer include:
- How will the home be titled?
- If only one person owns the home, how are costs split?
- Who pays for the mortgage, taxes, insurance and major repairs?
- What happens if one of the parties passes away — does their partner have a right to continue living in the property?
- Are the heirs of the deceased protected?
All of these questions should be answered and documented in writing to protect you, your partner and your respective heirs.
If you rent, we recommend putting both names on the lease. That way, even if your landlord has a claim on you alone for the rent, you’ll have a higher likelihood of being able to take legal action against your partner should you split up. And if you both own homes, consider renting the extra place, so there’s a backup plan until you’re certain the new living arrangement works out.
Long-term care needs and costs
Another overlooked risk to finances is potential long-term care costs. While this is certainly more likely among older couples, disability, high medical bills or expensive long-term care needs can arise at any age.
For some couples, this may be a reason to stay unmarried, especially in a state that imposes a legal duty for spouses to support each other’s long-term care costs. The reality, however, is that even absent a formal legal duty to cover care, if you have a partner who suddenly needs care, how will you respond? Will their children expect your assistance, either financially or in time spent caregiving? How will your own children feel if your assets are used to support a non-married partner?
In the midst of a health crisis, these questions become difficult to address and can put the wealthier partner’s assets at risk. We recommend that couples consider purchasing long-term care policies or earmarking money to cover each person’s potential care needs. Also, be sure you are aware of any health conditions that render your partner uninsurable, as those conditions may persist throughout your lives.
Along with considering the costs of health care, decisions during a health crisis are more complicated for couples who are not married. That’s because unmarried partners do not have the legal right to obtain medical information, or have a say in medical decisions.
The only way to provide access to medical information is by signing a Health Insurance Portability and Accountability Act (HIPAA) medical release allowing providers to give your medical information to your partner.
If you want them to be able to make decisions for you, then you’ll also need to have a health care proxy and/or a durable power of attorney for health care. To empower someone to make financial decisions for you, you’ll also need a durable power of attorney. Since your partner may be the first one to be notified in case of emergency, you’ll want these documents in place now to save time during a crisis.
Don’t assume anything
One final caution: Some people rely on their partner financially, and may even be tempted to make significant financial decisions — such as buying a home together or quitting their job. Before taking the step to move in with a partner, and certainly before making a significant financial decision, use our tips above and take our Living Together After 50 Quiz to confirm that you’ve considered all the implications these decisions may have on your current wealth and your ability to maintain and growth your wealth throughout your lifetime.
Dawn Doebler is a senior wealth adviser at Bridgewater Wealth, in Bethesda, Maryland, and co-founder of Her Wealth.