Money Without Matrimony

Wow, I can’t imagine managing money together without being married. Managing money in a marriage is tough enough.

If I was in an unmarried relationship, I don’t think I would try to manage money as a couple. It seems like too many problems. Maybe I need to read the book!!

What a nightmare Betsy must have experienced in the excerpt above!

Death finance is something everybody is hesitant to talk about. Nobody likes to say “So when/if you die, what do I get“… The example above perfectly illustrates why communication about finances are so very important!

@basicmoneytips, not every committed couple has the option to legally wed. In the United States, for example, gay couples are only allowed to get married in Connecticut, Iowa, Massachusetts, New Hampshire, and Vermont (also Washington, DC, though that situation is a bit more complicated).

And because of a piece of federal legislation called the Defense of Marriage Act (DOMA), these marriages are not recognized by the federal government and hence not by any federal agencies — like, say, the IRS.

JD, I’m going to try to track down a copy of this book; thanks for blogging about it!

I’ve been living this way for two years with my fiance. It’s really not that difficult. You just need to both be on the same page and communicate about expenses, insurance, etc…

If you wait until you’re married to get a clue about how to jointly manage money, assets, and insurance, than ha! Good luck!

To be fair, though, sometimes clarification is key. If you approach a relationship in an egalitarian manner, then the other person doesn’t expect anything after you pass away as you are each responsible for your own well-being (financially independent). Some people prefer this approach and avoid marriage because it would disallow such an approach.

For an example, like Jordan, my investments and assets are dispersed to my older brother first, or my younger brother second (if the older one is gone). This is because our money is to always remain only in our family, not in someone else’s family. So it depends on how the couple arranges their situation – if it’s co-dependent and not egalitarian – then yes, organizing finances in that way is imperative.

This book might be a good read for my girlfriend and me. We get into many financial debates, but I think if we can effectively communicate our finances, it will help tremendously.

Regarding a pre-marital house purchase, we bought our house together before we were married. Our deed was joint tenant but because all of the money for the down payment had come from a prior house that I sold, we entered into a contract agreement as to what would happen to the home if (1) we broke up or (2) if one of us died. It wasn’t a romantic discussion but I put a $100,000 into our home and as a result I wanted to (1) protect my investment (2) make sure we were in agreement as to the disposition of the home in the event of a death or break up. We wrote up the agreement ourselves and then had an attorney look it over for us, paid an hourly fee of a bout $200 for the service.

As for joint finances, I took care of paying all joint bills pre marriage. We each paid in a set amount for joint expenses that was based on our salary. I paid more since I made more.

After marriage, I took over paying all bills. All money that comes in, salary or rental income, is treated as joint money now and we each get the same amount of allowance to spend. Works for us.

I’d like to see more discussion on this. My boyfriend and I are both high earners and, as I understand it, we would probably be financially penalized if we got married. This is an extremely important discussion–I know a lot of other dual-high-income earners who were caught off guard by this.

Furthermore, we need to do a pre-nup since I own multiple businesses. My dad can write the pre-nup (he’s an attorney), but I’d like to see more about what I should have in it generally.

This plus the cost of getting married has me happy to be single for now, but more open discussion may help ease some of my fears. We’ve been living together and splitting costs for nearly 3 years now, and we have pretty open discussions about money, but getting married is a whole ‘nother ball of wax.

-Erica

I am in a similar situation to Erica. We have been living as if we were married for 6 years now and have no plans to stop until it will benefit us financially. The tax laws seem to be written with income inequality in mind. Take for instance Roth IRA AGI limitations:
Single : Phase out starts at $105k and ends at $120k
Married: Phase out starts at $166k and ends at $176k

How does that make any sense? If 2 people each make $105k/year, they can fully fund their Roth IRAs, but if they were married they could contribute nothing. Tax wise this doesn’t make a difference since its post-tax money anyway, but retirement wise it can be a huge difference 30 years from now.

Passive activity loss deductions are even worse… if you are single the phase out starts at $100k and ends at $150k. Well if you are married the phase out starts at $100k and ends at $150k. That makes even less sense! Sure you can carry over the losses, but I think most GRS readers would rather take their money now.

We have also avoided the wash sale rule and harvested losses by selling from one brokerage account and buying in the other at the same time. For $20/person in commissions you just got a $3k/person deduction. Ideally you would not have losses like this, but if you do why not take advantage of them?

It sounds like its going to be even worse sometime in the next couple of years if you make over $250k which provides even more incentive to not get (legally) married.

For someone who just went through taking the CFP exam, I was surprised by how little of the material was targeted towards this situation.

It’s very easy to assume that everyone is married with 2.5 kids because that’s what most of the financial advice is written about. (mainstream media)

I will have to pick up a copy of this book. Sounds very interesting.

@Christina: That’s not a bad idea. Ideas like that are exactly why I’d like to see more discussion on the issue.

I have seen some real horror stories around divorce, and I’d rather deal with counsel now than later! Of course, no one wants to think about divorce when they are getting married, but it is a fact for nearly half of marriages, and I’m not one to play with those odds.

-Erica

The institution of marriage was really designed for raising kids in a time when men were the primary wage earners. If there are no kids involved, life partners usually can accomplish most of the benefits of marriage with none of the potential costs [e.g. divorce].

That would be hard to do if you are not married it is tough enough already. but maybe with some guidence it will be okay.

This sounds like quite a compelling read, too bad it’s out of print. So much personal finance materials is geared toward the traditional nuclear family.

Betsy’s story is tragic and disturbing. The part about them delaying their nuptials because Jordan’s family was not that fond of Betsy is unfortunate. Life is too precious and fleeting to live it for other people. If Jordan and Betsy were married, in most jurisdictions, the will, without any other affirmative action on Jordan’s part, would have been revoked. If you make a will prior to getting married and later on get married the law assumes that the testator would want to provide for his spouse.

Also, Erica, I echo Poster #21’s sentiments, get impartial counsel. If your father were to draft the pre-nuptial you are setting the stage for it to be challenged and maybe even overruled.

As for the other comments, about dual income high earners – I’m not sure everything can be reduced to dollars and cents. There are other ways to have a secure retirement besides a Roth. My husband and I are trying to make a decision about whether we should aspire to max out each of our 401K prior to opening a Roth. The problem being is that we expect our household income to continue to climb. I would like to take advantage of a Roth as long as possible before reaching the phase out benchmark. Decisions, decisions!

Thomas- you might not be aware – but if you live in a common law state and have “declared” that you are a couple (and are heterosexual) , a divorce may be in the mix….My husband had to divorce his common law wife in order to marry me….

Good article. As for Betsy and Jordan, there are two sides to every story and there’s alot that was left out. What if Besty was a golddigger who was 20 years younger than Jordan? While it seems like “oh poor Betsy”, I think that most people would side with Jordan’s family. Think about it from their side… how many of us would expect to give up our family home to a person our deceased family member only knew a few years and chose not to marry because of tension with the family. My bet is that even if he had married her there would have been a prenup.

@ Wendy: it’s my feeling that there should always be a prenup. How do you expect a grieving widow to remember that “his” watch was actually handed down from Great-Uncle Bernie and, no matter how much her husband loved it, it should go back to her family, instead of being buried with him? Or, when she finds out about that one drunken night, that when she’s making a dramatic gesture of “closure,” she’s actually stealing his grandmother’s engagement ring from his innocent niece Katie?

My partner of five years and I each have our own individual accounts and the joint account that holds money for the mortgage, bills, day care, and groceries and other general purchases. We are both on the deed and the mortgage, both of our name are on the vehicle title and loans. Since we are both picky comsumers we buy our own clothing and the baby’s clothing from our own accounts. We share everything that has to do with us, to include our baby’s expenses like pampers and other toiletries. Anything else remaining she can use however she wishes and so can I. Medical bills are paid (using the FSA) by me since I am the only one that can put the baby on the insurance. We both make fairly the same amount of money so we contribute about the same amount to our 401k, about 10%. Before we had the baby, we saw a lawyer that drew up a will in case I died during labor (you never know, thank God I didn’t). The lawyer sparked some controversial questions but it was to help us out with how we felt and how we would handle certain situations. I have property I owned prior to meeting my partner and which I solely pay and I considered that my property to be left to my mother, my partner didn’t have an issue with that. My family is not to fond of my partner but she is MY partner so I look out for us, so anything else acquired after we met can be divided up if need be and I also have a trust for the baby. It works great for us…so far nothing has disturbed our method, and if something does then we can talk about it and deal with it.

@ Laura H. I’m a firm beleiver in prenups (if ony for the process of discussing the finances before marriage) but the examples you gave could have been handled by a will.
@ Rosa, I don’t agree with the way the family went about taking the house, it was unconscionable. However, I do believe they should have gotten the house eventually after giving Betsy sufficient time to make arrangements. I have to wonder how an “outsider” would have access to the home in the first place. Moving her out on that day required some forethought, coordination, and a deep level of hatred for Betsy. That was pure evil.

@J, the wash sale rule is not eliminated by using a different broker for the two transactions. Wash sales are based on the same stock sold and purchased.

Thanks for recommending the book. I’m going to try to get my hands on a copy.

My partner and I have a system that works fine for us with mostly separate finances (although we still discuss them quite often and are well aware of each other’s), and have put each other as the beneficiaries for the important stuff, so we’ll get most of the estate, however it’s still important to think about.