Even though you haven’t tied the knot just yet, you and your significant other may be planning to buy a home and open joint accounts. Taking steps to protect your individual and shared assets is a top priority, so you need to sit down and map out exactly what you are comfortable sharing with each other – and what you want to keep in your name. It’s even more important to bring up the money issue when you are going to buy your first home together. You need a clear understanding of who actually owns the property, who is responsible for paying various living expenses, and what will happen if you do end up separating.
Some important money matters for unmarried couples include:
Putting the Property in Your Name
If you’re not planning on tying the knot any time soon, make sure the property is in both of your names, not just one partner. You are essentially sharing this asset and you shouldn’t put yourself in a situation where you are paying a portion of the mortgage directly to your partner. Put the property in both of your names so that it’s clear that you own 50% of the asset.
Health Care Matters
Are you comfortable giving your partner power of attorney? Make sure you sit down and draft a formal agreement about health care matters and understand what your partner wants in the event of an accident or terminal illness diagnosis. You can speak with a health care attorney to discuss the different health-specific contracts and agreements you may need to sign. If you decide your partner shouldn’t be your power of attorney, you can make arrangements for a health-care proxy instead.
Opening Joint Accounts
If you decide to open a joint savings or checking account, make sure you are both clear about expectations on using these accounts, and who will be in charge of monitoring the budget. Delegating responsibilities related to your finances can reduce anxiety and tension about money you have decided to share. For some couples, maintaining separate accounts is simply a better, less stressful strategy. It’s up to you to determine whether you trust each other enough to share an account, and what limitations you must both abide by when using the funds. Make sure you are both clear on expectations and your budget.
Set aside time each week or month to discuss your budget and spending habits. This is especially important if you plan to share accounts and are using credit cards and debit cards connected to the same accounts. Creating a realistic budget and setting financial goals together can actually be a bonding activity and may reduce arguments or stress about finances in the long run.
Make sure you have a joint deed on the home or your partner will not be covered by your homeowner’s insurance. Your insurance company will consider your partner to be a house guest, which means that in the event of an accident, you will be responsible for paying for any damages on your own. Check with your insurance provider to make sure you understand what type of coverage you have.