Providing Financial Planning for Unmarried Partners

Lewin, Elizabeth S.
August 1997
Journal of Financial Planning;Aug1997, Vol. 10 Issue 4, p95
Academic Journal
This article discusses the significance of financial planning to unmarried couples. As soon as two people plan to move in together, questions come up about pooling money--not to mention the property, large or small, that is acquired later on. Before two people move in together, the smartest thing the financial planner can do is to assemble as much information on their spending, covering the past year if possible or at least the last six months. This will give both planners and clients a sensible framework within which to discuss how to manage a joint household and establish a spending plan. Many live-togethers pay less in federal income tax than married couples pay. Generally speaking, a working couple whose incomes are about equal will find a tax advantage in not getting married. If the incomes are quite disparate, however, the two will pay more in federal income taxes than if they were married. That is because if one partner is the principal wage earner, the tax code helps those in the traditional married family. Unmarried couples cannot deduct a partner's business or investment losses against their income, claim one another's dependents, and combine the other's itemized deductions, such as excess medical expenses and mortgage interest expenses. Live-togethers suffer from the disadvantage that the person who has the higher income is not allowed to use deductions that belong to his or her partner.


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