Cohabitating? Be Aware of These Financial Risks

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Craig Ferguson once shared the observation that “The Universe is very, very big. It also loves a paradox. For example, it has some extremely strict rules. Rule number one: Nothing lasts forever.”

Not to be cynical, but…many of us enter into a relationship with the best of intentions feeling like it will last forever. And if you are like most couples, you will most likely decide to move in together. Living together has become the norm, with nearly half of women aged 15 to 44 years old having cohabitated with a partner outside of marriage between the years 2006 and 2010.[1] And that number continues to rise.

But before mixing finances, make sure you understand some potential issues that could arise when co-mingling love and money. Protecting yourself financially is usually a smart move and may prevent powerful regrets later on.

So what are the potential financial risks when cohabitating?

[1] Casey Copen, Ph.D., demographer, U.S. National Center for Health Statistics, Hyattsville, Md.; April 4, 2013, report, U.S. National Center for Health Statistics, First Premarital Cohabitation in the United States: 2006-2010 National Survey of Family Growth.

Untangling the Tangle

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Finances can get complicated with cohabitating partners and this complication can happen quickly. Although the co-mingling of funds might start out innocently enough with one partner picking up the tab for most items, this can cause difficulties down the road when it comes to deciding who ‘owns’ a particular item. Unless receipts and great records are kept, it becomes more fuzzy as years go by. Most states don’t have statutes that address property division when couples aren't married and only a few states recognize common-law marriage. Consider legal advice and a cohabitation agreement to spell out what will happen in case the relationship dissolves.