Debt Management

How cohabitating couples can protect themselves financially


Taking these three steps before moving in could help avoid a money mess down the road.

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How cohabitating couples can protect themselves financially Peter Muller/Cultura/Getty Images




Let’s say you’re moving in with the one who makes your heart leap. Before jumping in with plans to relocate and redecorate, money and legal experts say couples should carve out time to outline the fiscal aspects of this new arrangement.

“If you are going to have a better chance of success, it’s by sitting down and talking about these things when everybody’s calm and you can talk about finances as a function of living,” says Deborah Todd, a CPA and certified financial educator with

Living together before marriage is becoming a rite of passage for many couples, and people are cohabitating for any number of reasons. According to the 2010 U.S. census, there are 7.5 million unmarried cohabitating couples. A Pew Research Center report points to a 50 percent increase in the number of cohabitating couples since the mid-1990s.

So how can you defuse the potential financial landmines to reduce the credit and monetary risks if cohabitation ends badly? Financial and legal experts suggest taking these three steps:

1.Keep separate accounts
“You become vulnerable once you have any type of joint accounts, such as a mortgage or credit card,” said Valerie Rind, the author of “Gold Diggers and Deadbeat Dads: True Stories of Friends, Family, and Financial Ruin.”

“Your partner’s financial behavior with respect to those joint accounts will reflect on your credit profile,” she explained in an email. “Late or missed payments will show up as blotches on both of your credit reports.”

If you are going to have a better chance of success, it’s by sitting down and talking about these things when everybody’s calm and you can talk about finances as a function of living.”

\u2014 Deborah Todd
CPA and financial educator,

Tre Dixon, an aircraft technician, can attest to the benefit of keeping separate accounts. He and his wife of 12 years initially lived together for a year before calling off the relationship and moving apart. “At that time, we had nothing but love to carry us until it was time to separate because we viewed life differently,” he says.

Moving on wasn’t complicated financially because the couple had not commingled credit cards or bank accounts. They ultimately reconnected and married several years later when they were able to create a financial plan together.

Don’t want to go with separate accounts? You have two options, each with its own dangers.

Opening a joint credit card in both parties’ names takes into account each person’s income and credit history. In this case, each of you can legally use the account. But each of you also is liable for all charges whether or not you made the purchase.

Or you could make a loved one an authorized user of your credit card. This gives that person access to use your card, but only you are ultimately responsible for the charges. The risk: If the one with whom you’re cohabitating leaves you in a lurch, you’re stuck with all the charges.

Seek help and talk it out

Learn to talk about money, says Deborah Price, CEO and founder of The Money Coaching Institute. She suggests that all couples who merge homes in any fashion seek financial coaching. Price, a pioneer in the field of money coaching, recommends that couples look for someone who can help them nail down a clear agreement on finances.

In her book, “The Heart of Money: A Guide to Creating Financial Intimacy,” Price warns that couples set up themselves for failure by rushing past this exercise. “Couples are almost exclusively unprepared to navigate the treacherous waters of the money conversation,” she writes. “So many of our money patterns and behaviors are subconsciously driven. Couples don’t do love and business well together.”

An experienced money coach should help you in two key areas:

  1. Understand how each person in the relationship relates to money.
  2. Define a clear agreement about how you can both work together on financial issues.

Once you learn how to talk with your loved one about money, you both can objectively make plans and address any potential challenges, money and credit experts say. If not dealt with, these challenges can lead to stress and frustration — weakening the relationship.

Set up a contract for living together
In the beginning, cohabitating couples have the best of intentions. Unfortunately, life can present complications that make continuing the relationship less inviting. And when cohabitating couples split, the same legal protections that help a couple going through divorce to sort out financial entanglements do not apply.

Anyone in a relationship dealing with an amount of money they would miss in case the relationship doesn’t work out should put it in writing.

\u2014 Lucy Chukwurah
an attorney with N. Lucy Chukwurah Law Group

That’s why money, credit and legal experts recommend a written agreement that keeps both parties on the same page and helps avoid misunderstandings.

“Anyone in a relationship dealing with an amount of money they would miss in case the relationship doesn’t work out should put it in writing,” says Lucy Chukwurah, an attorney with N. Lucy Chukwurah Law Group. “In a court of law, if it’s not on paper, it didn’t happen.”

Keeping the agreement updated as life’s circumstances change is the best protection against a future split that’s less than amicable.

Todd suggests that cohabitating couples spell out who’ll be responsible for which expenses, how financial accounts will be structured and maintained, and what happens with any money if you all part ways.

No one likes to dwell on the worst case scenario, but it’s best to tackle these concerns ahead of time to protect yourself financially.

After all, Todd says, “When the heart closes, so does the wallet.”

See related:5 ways a soon-to-be ex can wreck your finances, creditThink you’re a joint account holder? Think again.

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