Money Talks | Sept. 25, 2014

Unmarried vs. Married: The legal and financial pros and cons of both scenarios

 By Melissa Myers and Michael J. Tucker, Sept. 25, 2014.

gay cake toppersMelissa Myers: For many years we have both worked with same-sex couples and become experts in the double standards and loopholes they face when it comes to navigating legal and financial matters.

Michael J. Tucker: This has become more complex, as many Arizona couples have decided to get married in one of the many states that recognize same-sex marriages.

Myers: Yes, it’s as if there are two sets of rules to follow: one set of rules at the federal level and another at the state level.

Tucker: When Arizona eventually joins the ranks of the “recognition states,” it should make many planning these matters much more straightforward.

Myers: In the meantime, many of Arizona’s same-sex couples are holding off and remaining unmarried. For some, it is because they are waiting for Arizona to recognize same-sex marriages. For others, the choice to remain unmarried is based on reasons of their own.

Tucker: Which is a perfectly fine choice.

Myers: Yes, it is! And sometimes it’s the best choice, but we all know the legal and tax systems don’t tend to favor unmarried people who live together.

Tucker: There are many areas where this is true. For example, if one of the unmarried partners is in an automobile accident, technically, the other partner has no legal standing to be involved in the medical, financial and personal decisions of the injured partner unless they’ve made special provisions using legal documents.

Myers: Right. Also, inheritance laws favor and protect married couples in such a way that when one spouse dies the other spouse may inherit — even if there is no will.

Tucker: Those laws don’t exist for unmarried folks. If you die without a will in place, your partner could be disinherited.

Myers: Even simpler things become more complex for such couples. Let’s say, for example, one partner owns the home they both live in. The non-homeowner should have renter’s insurance to protect their possessions in case of a fire or flood. This would not be necessary for a married couple.

Tucker: And both unmarried partners should be cognizant of the other’s liability coverage on their automobile insurance policies. If both partners own the house and one gets in an accident, the house they own jointly could be susceptible to creditors.

Myers: Michael, you help unmarried couples by creating cohabitation or domestic partner agreements.

Tucker: Yes, these agreements can be used to spell out the couple’s intentions, should the couple break up. Since divorce laws don’t apply to unmarried couples, these documents may be the only thing they have to fall back on.

Myers: The documents could state who gets the house or other assets, for example.

Tucker: That’s right. Another area that is very different for unmarried versus married couples is taxes.

Myers: Sometimes it can actually be beneficial not to be married when it comes to taxes!

Tucker: For example, consider a married couple that falls in the highest income tax bracket — 39.6 percent in 2013 — for any income above $457,600. If unmarried, each individual partner could make up to $406,750 before reaching this rate.

Myers: A married couple earning more than $191,000 cannot make a Roth IRA contribution, but two single people can each make up to $158,000 before being disallowed a Roth contribution.

Tucker: It is a complex landscape and, therefore, important to take time to understand all the pros and cons of unmarried versus married. Make sure your advisors are “up” on the differences and planning strategies available to both.

BIO_MMyersMTucker_WEBThis material has been provided for general informational purposes only and does not constitute either tax or legal advice. Investors should consult a tax or legal professional regarding their individual situation. Neither Camelback nor Commonwealth offers tax or legal advice.