If you want to ensure that critical decisions stay in the hands of your partner or friend, you'll need to prepare a few simple documents: health care directives and durable powers of attorney for finances.
Every state has laws authorizing individuals to create simple documents setting out their wishes about the type of medical treatment they do (or do not) want to receive if they are unable to communicate their preferences. These documents may also name someone to make medical decisions on the signer’s behalf. These documents are particularly important for unmarried partners and anyone who's not in a relationship. If you don’t take the time to prepare them and you become incapacitated, doctors will turn to a family member designated by state law to make medical decisions for you. Most states list spouses, adult children, and parents as top-priority decision makers, making no mention of unmarried partners.
There are two documents that permit you to set out your health care wishes, both grouped under the broad label health care directives or advance directives.
Note that some states combine these two documents into one, which is often called an "advance health care directive," or simply "advance directive."
With a durable power of attorney for finances, you may name someone you trust (called your “attorney-in-fact” or “agent”) to handle your finances if you become unable to take care of yourself. Every state recognizes this type of document.
As with documents directing medical care, you should seriously consider making a durable financial power of attorney if you want your partner or friend to manage your money when you aren't able to do so. If you don’t prepare the document and you later become incapacitated, your partner, relative, or friend will have to ask a court for authority over your financial affairs. These conservatorship proceedings can be time-consuming and expensive. And they can be disastrous for unmarried couples if a judge appoints another family member or even a stranger to take over, especially if your finances have been intertwined with those of your partner for a long time.
You can make your financial power of attorney effective immediately or you can specify that it should go into effect only if you become incapacitated (what's called a “springing” power of attorney). Some people are more comfortable making a springing document. But for couples in long-term, trusting relationships, making the document effective immediately can have advantages. That way, your partner can handle financial transactions for you at any time, even when you're not incapacitated. This can be useful if you are out of town, under the weather, or temporarily unavailable for any other reason.
When you make a durable power of attorney for finances, you can give your partner (or other attorney-in-fact) as much or as little control over your finances as you wish. The powers you grant may include:
As with health care directives, you can make a durable power of attorney for finances if you're at least 18 years old and of sound mind. And you can change or cancel your document at any time—again, as long as you are of sound mind.
There are a number of ways to find the proper health care and power of attorney forms for your state. You don’t usually need to consult a lawyer to obtain or prepare them. Here are some good sources for forms and instructions:
Once you've completed the documents for health care and financial power of attorney, you'll need to sign and finalize them. The requirements for this vary from state to state. For the power of attorney, you'll usually need to sign it in the presence of a notary. Some states also require witnesses. When that's the case, the laws might set limits on who may act as a witness.
]]>When an unmarried couple cohabitates, both partners will need to file an individual tax return at the end of the year. Unmarried couples may not file a joint tax return.
Unmarried partners may be able to use the “head of household” filing status if they support a child dependent. If your child lives with you and your partner, one of you may file as head of household to claim the child tax credit, but only if you’ve provided at least 50% of the financial support for the child.
Additionally, you can only claim the credit if your child lived with you for the last six months of the tax year. Married couples filing a joint tax return don’t need to make this consideration because they will add the child to the complete tax form and the math will work itself out. That said, in some cases, married spouses with a higher income may not qualify for the child tax credit.
Qualified individuals can claim their partner as a dependent if the partner:
Many unmarried couples own a home together, which can sometimes create complications at tax time. If you live with your partner, and the mortgage is in just one partner’s name, only the listed partner can claim a deduction for mortgage payments and interest, even if the unnamed partner contributed to or covered the payments.
In one case, an unmarried couple lived in the boyfriend’s home. The mortgage was in the boyfriend’s name, but both contributed to the household bills, including the mortgage payment. Over time, the couple had a child, and the boyfriend quit his job and became a stay-at-home parent. For four years, the girlfriend paid the mortgage each month. Eventually, the couple added the girlfriend’s name to the deed and mortgage.
When the girlfriend claimed the prior four years of mortgage payments and interest on her taxes, the Internal Revenue Service (IRS) rejected her request, stating that she could only receive a credit for the money she paid after she was legally responsible for the mortgage. In this case, the woman was out over $10,000 because she was unmarried and paying someone else’s bill. (Wheeler v. Commissioner, T.C. Summary Opinion 2011-83, July 6, 2011.)
Anyone can leave up to $13.61 million (in 2024) at death without incurring federal gift or estate tax. Married couples can leave even more. Married people can leave any amount of property to their spouse without tax penalty. Further, married couples can share their $13.61 individual exemptions so that if Spouse A dies without using any (or all) of his individual estate tax exemption, Spouse B can choose to use his exemption and leave up to $27.22 million without owing estate tax.
Of course, most people -- married or not -- do not need to worry about federal estate taxes at all because they don't have $13 million. State estate taxes are a somewhat different matter because, in the handful of states that levy estate taxes, the exemptions are lower than the federal exemption. You can learn more about state and federal estate and gift taxes in the Estate and Inheritance Taxes section of Nolo.com.
]]>This article won't help you decide whether you need a particular type of insurance but will help you sort out some of the issues involved when buying insurance with a partner.
Life insurance is a topic that many married couples discuss throughout their relationship. But you don't have to be married to take advantage of life insurance protection. If you and your partner are unmarried, but you have assets together (like a home), or you have children, either of you can pay for an insurance policy and list your partner as the beneficiary.
Life insurance may also be on your mind if you're unmarried but want to protect your partner if you die. Many people get life insurance as a benefit of employment or buy their insurance policy through a private company. Either way, you can name your partner as a beneficiary.
Unless you paid cash for your home, most mortgage lenders require homeowners to purchase homeowners' (or hazard) insurance. Homeowners' insurance covers the loss of a house after a fire, flood, or other acts of destruction. It used to be difficult for unmarried couples to buy homeowners' insurance together, but this is no longer true. Many companies now write policies for unmarried couples at the same rates offered to married couples.
However, if you're the sole owner of the house, the insurance company may not automatically cover your partner's belongings on the policy. If your partner has valuable personal property, check with your homeowners' insurance company to see whether it requires both household members to be on the deed. Otherwise, your partner should purchase a separate renters' insurance policy.
Renters' insurance protects tenants against the loss of their personal property due to theft or some act of destruction. Like homeowners insurance, renters' insurance is easy for an unmarried couple to obtain together.
Insurance companies insure the property, not the owners of the property. And the rates are related to your building's age and security, the neighborhood you live in, and how well your landlord maintains the building. Shop around. You should be able to find one policy that covers both of you, although a few companies may try to charge you more or require that you each buy your own policy.
Purchasing automobile insurance can be a problem for unmarried couples, but not to the extent it once was. If you each own a car, you should have no trouble getting separate insurance. For unmarried couples who jointly own one vehicle, obtaining one policy will be cheaper than getting two (one for each partner). But you may have to shop around to find an agent and company that will allow you to do this.
If you jointly own two or more cars, it's often cheaper to get one policy covering all your cars. Most insurance companies allow unmarried couples to combine coverage—and thereby get discounts and other valuable benefits. But again, not all insurance agents or companies will offer these benefits to an unmarried couple. If you need a breakdown of the costs and benefits of combining policies or keeping them separate, speak with your insurance agent.
If all else fails, consider transferring ownership of both cars to one person (call your department of motor vehicles and ask how you can change the title slip) and listing the other person as a secondary driver. Transferring ownership can be messy, especially if you and your partner breakup in the future.
Some cities, states, and private employers offer domestic partner benefits to their employees. And before same-sex marriage became legal, several states had passed laws creating domestic partnerships and/or civil unions which allowed same-sex couples to register their unions in order to obtain the same or similar state marriage benefits that married couples enjoyed. Since the United States Supreme Court legalized same-sex marriage throughout the country, many states have eliminated civil unions and domestic partnerships. However, a handful of states continue to allow them.
If you're in a domestic partnership state, you might be able to obtain insurance for your partner. A majority of the country's largest corporations offer domestic partner benefits. You can find a list of Fortune 500 companies that provide domestic partner benefits, as well as other information on benefits, on the Human Rights Campaign website. You can also contact your human resource director to see if your employer offers health insurance to domestic partners.
Even if your employer does provide domestic partner health benefits, federal law does not recognize domestic partners as spouses for tax purposes. Tax law treats any premium you pay to cover your domestic partner to be taxable income, not a pre-tax deduction from income as it is when the employee is covering a spouse.
Also, be aware that the federal COBRA (Consolidated Omnibus Budget Reconciliation Act) health insurance rules don't apply to your partner if you lose or leave your job. Under COBRA, your employer must allow you to continue health insurance coverage for a certain period of time, as long as you pay the premiums. The law doesn't entitle your partner to continue domestic partner benefits, as would be the case if you were married.
If your employer doesn't provide domestic partner health benefits, and your partner doesn't get benefits through a job (or doesn't work), see whether your employer will agree to cover your partner on its health plan if you pay for the premiums. Group plans available through employment are usually less expensive and often provide better coverage than individual plans.
In some states, the dependent of a worker killed on the job can obtain death benefits from the state workers' compensation insurance program. Because definitions of "dependent" are broad, courts have allowed unmarried partners to recover these benefits in several instances. For example, a Maryland court awarded workers' compensation benefits to a woman who lived with the deceased worker for many years—giving up her job to take care of the house and raise the children while the deceased provided financial support. (Kendall v. Housing Auth., 76 A.2d 767 (Md. Ct. Spec. App. 1950).)
In California, a court awarded benefits to a woman who lived with the deceased worker because she was a "good faith" member of his household, even though she was married to someone else. (State v. Workers' Compensation Appeals Bd, 94 Cal. App. 3d 72 (Ct. App. 1979).) And in Oregon, the Workers' Compensation statute states that unmarried cohabitants are entitled to compensation as long as the couple had children together and lived together for more than one year before the worker was injured. (Or. Rev. Stat. § 656.226.)
However, not all courts have been so generous. In South Carolina, a court denied workers' compensation benefits to a woman living with and dependent on a deceased worker because she was married to another man. (Palm v. General Painting Co., 370 S.E. 2d 463 (S.C. Ct. App. 1988).) And in Nevada, a court denied death benefits to the unmarried cohabitant of a deceased worker, even where the cohabitant had previously been married to the deceased worker because she no longer had a "legally recognizable relationship" with him. (Banegas v. State Indus. Ins. System, 19 P.3d 245 (2001).)
In many states, an employee may obtain unemployment insurance benefits for quitting a job for "good cause." Often, the unemployment board will consider a spouse's decision to leave employment in order to accompany the other spouse to a new home to be a "good cause." In several cases, this benefit has been extended to unmarried partners as well. For example, the Massachusetts Supreme Court ruled that a woman who left her job to remain with her living together partner of 13 years who was relocating his business had compelling reasons to quit and was entitled to unemployment insurance benefits. (Reep v. Commissioner of Dep't of Employment & Training, 593 N.E. 2d 1297 (Mass. 1992).)
The California Supreme Court also awarded unemployment benefits to an unmarried woman who quit her job to follow her partner to another state. (MacGregor v. Unemployment Ins. Appeals Bd., 37 Cal. 3d 205 (1984).) However, in that case, the court based its decision mainly on the fact that the unmarried couple had a child together. It's unclear whether the California Supreme Court would rule the same way if an unmarried couple did not have children together.
If you have specific questions, contact a family law attorney in your area for advice.
]]>Social Security Retirement Insurance benefits are available to anyone who meets the work credit requirements and reaches retirement age. Because you pay into the retirement system through your paycheck (or taxes) and individual work history, the government won’t reduce your benefits if you live with another adult.
Social Security Disability Insurance (SSDI) benefits are available to individuals who are disabled and can’t work. Before you can receive SSDI, you need to go through a stringent application process to demonstrate that you are unable to work. SSDI is a monthly cash benefit program meant to supplement the income you lose if you become disabled, and your living situation will not change the monthly award unless you reside with a dependent child, in which case the government will likely provide your child with a monthly dependent benefit.
Supplemental Security Income (SSI) is another government-funded benefit available to individuals (or couples) who are both low-income and either disabled, blind, or over the age of 65. Because SSI is based on an applicant’s income and qualifying disability, unmarried partners who both qualify individually may receive more benefits than a married couple. For example, unmarried partners who are eligible may receive up to $750 monthly from the SSI program. The maximum available monthly benefit for married couples, however, is only $1,125. If you have a qualifying child, you may also receive up to $376 per month in “essential” person benefits.
Each state has a variety of income-based benefits, like housing assistance, welfare, and food stamps, that may be impacted if you live with an unmarried partner. Although your state Department of Human Health and Services can’t restrict who you live with, it can reduce or eliminate your benefits based on the size of your household or combined income.
For example, if you’re a single mother receiving assistance and your child’s other parent moves into your home, the state will include both incomes in the reevaluation of your monthly eligibility.
The Housing Choice Voucher Program—Section 9—is a federal program administered by each state. The purpose of the housing program is to provide low-income, disabled, or older individuals and families with affordable housing options. The programs are based on income and household size, so if you apply as an individual and the state approves your application, you will need to update your case file with your local Department of Human Services Department if you would like to add a member to your household. Typically, if you add members to your home, the state will recalculate your benefits using all available income, which may reduce your monthly voucher or benefit.
While all the previously mentioned programs are available to people who qualify, it’s important to understand that the benefits available are limited and resources are often low. If you qualified for assistance in the past, but no longer require it, it’s crucial that you contact your caseworker to update your file. Additionally, if you have significant changes in your case, like moving in with an unmarried partner, you must inform your local benefits agency to ensure you’re receiving the right amount of monthly assistance.
If you fail to update your state agency and your caseworker discovers a change in your situation that would decrease your benefits, you do run the risk of losing your benefits for the failure to update. The local Department of Human Services can open an investigation into your case and depending on the results, you may receive a letter informing you that the state is discontinuing your benefits. You can request a formal hearing to reevaluate the outcome of the investigation.
If you have questions, you should contact your local Department of Human Health and Services.
]]>For some couples however, sharing a last name signifies an unbreakable union. Fortunately, the process to change your name is relatively simple.
If you’d like to take your unmarried partner’s last name, you can do so with a court order, but you'll need to follow your state’s guidelines and restrictions. State rules may vary, but these are the most common:
Some states allow you to change your name by using the new name and gradually changing your official documents to match the name you’re using. This "usage method" is legal in many states, but it’s not always effective. In most cases, you can’t change your government identification without a court order, like a marriage certificate or divorce judgment.
Most government agencies, colleges, employers, and banking institutions require a proper form of government identification before you can receive services or apply for benefits. In our post-September 11th world, many agencies won’t accept your word that your new name is legitimate, especially if it doesn’t match your current identification.
For most people, it’s worth spending the time and money to legally and officially change your name.
Each state’s name change requirements vary, but most require you to file a formal petition (written request) with the local court. Your request must be complete with your current and proposed new name and include a statement that you’re not seeking a name change for any illegal purpose. To prevent anyone from committing fraud or escaping creditors, many courts require you to publish notice of the proposed name change with the local newspaper to inform potential creditors.
In some states, you must pay for and obtain an official set of fingerprints. In most cases, you can contact your local law enforcement agency to schedule a visit and inquire about the cost.
Once you meet your state's requirements, you’ll attend a hearing in front of the judge to certify under oath that you’re changing your name willingly and without fraudulent intent. After you receive the signed court order, you can present it to local agencies, creditors, banking institutions, and schools to implement the name change and gain a new identification card.
Remember, your name change is permanent. In the event of a break up, married couples can simply request a name change in their divorce judgment, but unmarried couples will need to complete a second court process in order to use their original names again.
Common law marriage is still recognized in several states. There is no formal ceremony required to establish this type of relationship. The requirements will vary by state, but generally, a common law spouse can prove a common law marriage by showing specific conduct, including:
Sharing the same last name is one of the many ways a couple can hold themselves out to the public as married. If you live in a common law marriage state, and you don’t want the state to consider you legally married, it’s critical that you take this into consideration before you change your name to match your partner's. You may want to consider entering into a written agreement of mutual intent not to enter a common law marriage. If you have questions about the legal impact of sharing a last name with your partner, you should speak to a local family law attorney.
It’s no surprise that when you and your unmarried partner share a name, you may have property division issues down the road if you break up. Whether intentionally or unintentionally, sharing your last name may indicate your intention to combine income and may imply that you and your partner share personal or real property.
If you would like to protect yourself from future property division issues, you and your partner can create an agreement to keep your property separate. You might also consider asking an attorney to help you draft a cohabitation agreement, which allows unmarried couples to identify separate and joint property and agree how to split financial responsibilities in the event of a break up.
]]>Unmarried couples can use retirement plans in much the same way—to provide for a surviving partner. But unmarried couples need to jump through a few more hoops to accomplish the same thing.
Whether you have an IRA, a 401(k), or another type of retirement plan, you may name any beneficiary you want. But you must do exactly that—name the beneficiary by filling out a beneficiary designation form that states your wishes. Generally, your financial institution will require you to complete a beneficiary designation form when you first open an IRA. But in the case of an employer’s plan, you might have to request a form from your plan administrator.
Many employer plans name a surviving spouse as a default beneficiary in the event a worker fails to designate a beneficiary in writing. However, unmarried partners will not be default beneficiaries, so it is important that you complete a form, then keep a copy of the form in your files and give one to the plan administrator.
Naming a beneficiary of your retirement plan accomplishes several things. First, it ensures that the assets are distributed to the people you intend. Second, designating a beneficiary might protect the retirement plan from probate. (In many states, retirement plan assets are not subject to probate, provided there is a clear designation of beneficiary. Without such a designation, assets might be forced through probate to identify the appropriate heir.) Third, when you name a beneficiary of your retirement plan, the individual or individuals who inherit the plan will have more control over how quickly the assets are distributed, potentially saving your beneficiary a bundle in taxes.
Bear in mind that naming a beneficiary is not an irrevocable action. You may change your beneficiary at any time by completing a new beneficiary designation form.
Some people make the mistake of failing to name a beneficiary or simply naming “my estate,” believing their will should take care of everything. But in the case of a retirement plan or IRA, it is the beneficiary designation form, not the will, that governs what happens to the assets. So, for example, if your beneficiary designation names your brother as beneficiary of your IRA, but in your will you indicate that you want your IRA assets to go to your partner, the IRA assets will go to your brother, because his name is on the beneficiary designation form. Similarly, if you fail to name a beneficiary on the beneficiary designation form, you are deemed not to have named a beneficiary of the plan, even if you try to leave the retirement funds to someone in your will.
Married couples enjoy some advantages over unmarried couples when it comes to inherited retirement plans. For example, and perhaps most important, a spouse who inherits a retirement plan is permitted to roll it over into a retirement plan of his or her own. Having done so, the spouse can then treat those assets as if they had always been part of his or her own retirement account.
In comparison, the surviving partner in an unmarried couple cannot roll over his or her deceased partner’s retirement assets into the survivor’s retirement plan. If the survivor attempts to make such a transaction, the assets would immediately be subject to tax and penalties.
The picture is not completely bleak, however. If you inherit an IRA from your partner, you are not required to take all the money out immediately and pay taxes on it (although you may if you wish). Instead, you are permitted to spread distributions over your life expectancy, thereby reducing the tax burden.
Thanks to a new law that took effect in 2007, you can achieve much the same result if you inherit your partner’s interest in an employer’s retirement plan. You may roll over your partner’s retirement plan assets into an IRA and then take distributions over your life expectancy. For this to work, you must satisfy the following conditions:
• You must have the retirement plan assets transferred to a new IRA, not an existing one.
• The new IRA must be in your partner’s name, not your name. (This allows the IRS to distinguish between IRAs inherited by a nonspouse and those belonging to the original owner or a spouse; different distribution rules apply so the IRS needs to know which is which.)
• The transfer must take place as a trustee-to-trustee transfer, meaning you can’t take the money out and then put it into a new IRA—it has to be rolled over directly from one savings vehicle into the other.
• The employer plan must allow the rollover.
There’s more good news. Even if the plan provides that your partner’s interest must be paid out within five years (the five-year rule), you can void that requirement by taking your first required distribution from the employer plan on or before December 31 of the year after your partner’s death and rolling over the balance into a new IRA in your partner’s name—usually it will be titled to include your name as well; for example, it might say: “John Doe (deceased) IRA, for benefit of Jane Doe.” If you roll over the assets into the new IRA in the year of death, you may roll over the entire amount and take the first required distribution the following year. But again, for all of this to work, the employer’s retirement plan has to permit the rollover to an IRA.
For more information about inheritance and taking money out of retirement plans and IRAs, see IRAs, 401(k)s & Other Retirement Plans: Taking Your Money Out, by Twila Slesnick (Nolo).
One option for wealthy couples (married or not) to avoid or reduce estate taxes is to leave property to each other in a bypass or life estate trust (commonly called an AB trust), rather than leaving it outright to each other, For details, see the article Tax-Saving AB Trusts on this site.
If you or your partner has children from prior marriages or relationships, special issues may emerge when it comes to estate planning. You may feel conflicted about how to leave your property in a way that’s fair to all your loved ones. On one hand, if you die first, your surviving partner may need additional income or the use of your property to live comfortably. On the other hand, you probably want to leave something to your children from a former relationship. Things get even more complicated if the children themselves feel entitled to inherit your property and become resentful if they believe they will lose it to your partner. If your current partner and your children don’t get along, the situation gets even dicier.
Fortunately, there is an estate planning solution to deal (at least partially) with the problem of possible conflicts over property: a property control trust. This lets the surviving partner use all or just some of the trust property, such as a house (or income from that property) for the rest of his or her life. When the survivor dies, the property goes to the children. A property control trust restricts the rights of the surviving partner to use the property placed in the trust. The surviving partner is usually called the “life beneficiary” of the trust. His or her rights to use trust property, receive trust income, or spend trust principal are as limited as the person who establishes the trust (the grantor) determines they should be. Restricting the surviving partner’s rights protects the trust property, so that much of it remains when the surviving partner dies. Then, the trust property goes outright to the grantor’s children from a prior marriage or to other beneficiaries the grantor named.
You’ll need a lawyer to draw up a property control trust. Check Nolo's Lawyer Directory to find an experienced local estate planning attorney to help you draw up a property control trust and handle other special estate planning needs.
Federal and state estate tax rules have been in great flux, especially in recent years. Still, the vast majority of estates don't pay either state or federal estate tax, and that's not likely to change.
For detailed and up-to-date information on federal and state estate taxes, including state inheritance taxes, gift taxes, and more, see the Estate and Inheritance Taxes articles in the Wills and Estate Planning section of the Nolo site. If you have a large estate, consult an estate planning expert.
All couples benefit from clearly agreeing who will pay for the rent, car installments, or groceries. When you live together, you must also decide whether to pool your money and the property you buy with that money, or keep it all separate. This section provides an overview of an unmarried couple’s rights and responsibilities when it comes to debt and credit. Once you understand these, you’ll be better prepared to write out your agreement about sharing money and property—equally, partially, or not at all.
Unlike marriage, living together does not make you responsible for your partner’s debts. Should your partner declare bankruptcy or face other debt problems, you won’t lose your property as long as you’ve kept it separate. Your wages cannot be attached and your property cannot be taken to pay for your partner’s overdue bills or debts, and your credit rating will not be negatively affected by your partner’s financial problems.
But this financial independence may suddenly disappear if:
• you sign a joint purchase agreement
• you cosign a loan with your partner obligating yourself to pay the debt if the person taking out the loan fails to do so
• your partner’s debt is charged to a shared or joint account, or
• you register as domestic partners, in some situations.
There are many different ways to pool money—not at all, completely, or on a limited basis. It’s up to you. You should have no problem opening a joint checking or banking account under both your names. In general, joint accounts are sensible if you limit their purpose (for example, for specific household expenses or for travel) and keep adequate records. Many unmarried couples have peacefully maintained joint bank accounts for years.
But a joint account is still a risk. Each person has the right to spend all the money. Both partners are responsible for all activity involving the account. You’re equally liable for bounced checks, overdrafts, and all the rest. This can cause big problems if one of you is a habitual overspender. Record keeping can pose another problem with joint accounts. It’s often difficult to keep track of how much money is in the account when two people are writing checks and making withdrawals. You’ll have to set up a reliable method of tracking these things and then resolve to stick to it.
If you want to do everything possible to keep property ownership separate, it’s best not to open joint accounts. If you do, sign an Agreement to Keep Property Separate.
As with bank accounts, you may want to keep your credit accounts separate and each deal with creditors on your own terms. In that way you don’t have to worry about the other person’s purchases and any potential damage to your credit rating. Nevertheless, many unmarried couples open joint credit card accounts in which both partners are authorized by the credit lender to charge up to a credit limit.You can open a joint account for broad purposes, such as paying household expenses or to fund a distinct project—for example, remodeling a kitchen, saving for a vacation, or making a joint investment. Or you may use a joint card solely for household purchases, and use your individual cards for all other expenditures.
It’s fairly easy to put two names on a credit card. You simply fill out a joint credit card application. Many companies have changed the blanks from “spouse” to “co-applicant” or “co-applicant/spouse.” If the application form only says “spouse,” cross off the word “spouse” and write in “co-applicant.” Don’t claim to be a spouse—that term has a specific legal meaning (having to do with liability and responsibility), and lying on a credit application is fraud.
As long as one of you has sufficient income or savings to be considered a good credit risk—that is, you appear to be able to pay the bills—you’ll probably get the credit card. If one of you has a poor credit history, you may be denied a joint card, even if the other’s credit is perfect. The partner with better credit may have to reapply in his or her name only.
If you’ve lived together for a long time or have had joint credit card or bank accounts, it’s possible that your credit report has become intertwined with that of your partner or has information on it that belongs only to him or her, and not to you. This is usually not to your advantage, especially if your partner has bad credit.
Your credit report contains your credit history. Credit reports are maintained by credit bureaus—companies that collect information related to your creditworthiness, including your bank and credit card accounts, loans (such as mortgages, car loans, and student loans), payment history on those loans and accounts, delinquencies on accounts, bankruptcy filings, criminal arrests and convictions, current and previous employers, lawsuits and judgments against you, and tax or other liens. Creditors, landlords, employers, banks, and collection agencies can request and review your credit report.
Unfortunately, many credit reports contain inaccurate or outdated information. If you have some joint accounts with your partner or have been living together for a long time, the credit bureaus may have included information on your credit record about your partner’s separate accounts. Information about separate accounts should only appear on the report of the partner responsible for that account. Information about joint accounts should appear on both reports.
Each partner should request a copy of his or her credit report and review it for errors or outdated information. It’s a good idea to do this every year. Contact one of the three major national credit bureaus to get your report.
The federal Fair Credit Reporting Act (FCRA) now requires each major national credit bureau—Equifax, Experian, and Trans Union—to provide you one free copy of your credit report each year. You can request your free report by phone (877-322-8228) or online at annualcreditreport.com.
You may be entitled to additional free copies of your credit report in certain circumstances, such as if you believe that your credit file contains errors due to fraud, such as identity theft.
If you find errors on your report (for example, a car loan for which your partner is the only signatory) or outdated information, notify the credit bureau in writing. The bureau is required by law to correct your report. If the bureau investigates the item and disagrees with you, at the very least you can include a brief explanation on your report about the disputed item.
The Personal Finance section of the Nolo website includes extensive articles on credit and credit repair. Another useful resource is Credit Repair, by Robin Leonard and Margaret Reiter (Nolo).
Unmarried couples that live together are often at a disadvantage when it comes to Social Security benefits—especially if one partner stays at home caring for children or running the household.
Typically, you qualify for Social Security benefits based on your own earnings record. If you don’t work at a job that requires payment of Social Security tax, you don’t earn credit towards Social Security benefits. But married couples (including couples who have a common law marriage) get a benefit—spouses are eligible for certain Social Security benefits based on the other spouse’s earnings record. These are called dependents’ benefits (which you get if your spouse qualifies for retirement or disability benefits) and survivors’ benefits (which you get if your deceased spouse or ex-spouse qualified for retirement or disability benefits). So, for example, if a husband stays at home and takes care of the kids for a number of years, he may still be able to collect Social Security benefits based on his wife’s earnings record.
Adults who live together, but are not married, are not eligible for their partner’s dependents’ or survivors’ benefits although their children are dependents of both. This presents an obvious disadvantage when one partner in a living together arrangement works outside the home and the other works in the home caring for kids or taking care of the household.
A stay-at-home partner could earn Social Security credits, however, if the other partner employed him or her to take care of the home and children. The “employer partner” would pay wages to the stay-at-home partner and pay Social Security tax on the stay-at-home partner’s behalf. Both partners would have to comply with other requirements. For example, the stay-at-home partner would have to pay state and federal income tax on the wages. And in many states, the “employer partner” would also have to pay disability insurance and other types of insurance or taxes.
Also, living with someone doesn’t end Social Security benefits derived from a former marriage. If your spouse has died and you are receiving survivor’s benefits or if you are divorced, you can get benefits on your ex-spouse’s Social Security account if your marriage lasted at least ten years and, in some cases, if you have been divorced for at least two years (it makes no difference whether a former spouse has remarried or you are living with someone). Similarly, if you qualify for benefits as a divorced spouse and your ex has died, you can receive survivor’s benefits as early as age 60 (50 if you’re disabled).
For advice on Social Security rules and benefits, contact a local office of the Social Security Administration or check the agency's website. For a clear explanation of Social Security benefits—what’s available and how to claim them—see Social Security, Medicare & Government Pensions: Get the Most Out of Your Retirement & Medical Benefits, by Joseph Matthews with Dorothy Matthews Berman (Nolo).
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