By Stacy Johnson
NEW YORK (MoneyTalksNews) —Here's some sobering information:
According to a March 2012 analysis of census data conducted for USA Today, about one in 15 unmarried American heterosexual adults were in live-in relationships.
In fact, nearly half of U.S. adults in their 30s and 40s have lived together in a romantic relationship outside of marriage.
I call this "sobering" not because I object, but because I suspect that many unmarried couples haven't considered the financial ramifications of living together. That's a mistake because they're not afforded all of the same protections and advantages that married couples have.
Every young couple that breaks up has faced the issue of "this is yours, that's mine" – from books and music to pets and furniture. But living together as you get older (and hopefully wealthier) can pose additional challenges.
I did a TV news story offering advice for cohabitating couples. Check it out, then read on for more information.
It's essential to remember, whether gay or straight: When it comes to money, the law doesn't recognize relationships not documented with paper.
How to buy half a house
With mortgage rates near historic lows and home prices rising, unmarried couples may decide to not only move in together, but buy their own place. This could be a great move, but be aware of potential problems.
Keep in mind what I said above: The house belongs to the person whose name appears on the legally recorded deed. It doesn't matter what verbal agreements were made or who paid the mortgage. So make sure both parties are named on the deed.
The two basic ways of taking title with other people are joint tenancy with right of survivorship and tenancy in common. The difference is that with right of survivorship, your interest in the property automatically transfers to the other owner when you die. With tenancy in common, it doesn't.
Also keep this in mind: If you both apply for the mortgage, you're both responsible for paying it — even after you break up. Also, if both parties are on the deed as owners, but only one is on the mortgage, the one responsible for the mortgage remains responsible, even if that person has moved out and moved on.
Another common scenario: John already owns a house, then Jane moves in and, because she makes more than John, proceeds to make the monthly mortgage payments. Is Jane then entitled to any of the equity she's creating by paying down John's mortgage? No. Absent a legal document to the contrary, it's John's house and his equity.
So, if you're thinking of buying a house together – or taking on the responsibilities of someone who already owns a home – go into the transaction with your eyes open. The steps are simple:
- Think it through.
- Talk it out.
- Draw it up.
- Have a lawyer look it over, then have it notarized or recorded.
- Live together for a significant period of time (not defined in any state).
- Hold themselves out as a married couple — i.e., share a last name, refer to each other as husband and wife, and file a joint tax return.
- Intend to be married.