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Our households are changing and getting smaller  |
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 The size of the average household is dropping. In 2005, the proportion of households consisting of one person living alone increased from 17 percent to 26 percent, just as households consisting of five or more people decreased from 21 percent to 10 percent. Additionally, the average number of people living under one roof declined from 3.14 to 2.57 people.
This new statistical breakdown creates a whole new financial reality as divorced men and women, never married men and women, same-sex couples or singles choosing some kind of communal living situation attempt to face a new set of financial challenges. There is a lot of attention placed on the spending power of these groups, but at the same time there is very little attention placed on the need for these groups to develop financial plans that safeguard their lifestyle, in the same respects as there is for married couples.
Because unmarried couples and individuals face an entirely different set of obstacles in dealing with such things as assets, securing child custody rights, the need for financial planning is crucial. All unmarried couples and couples of convenience should seek the help and advice of a certified financial planner to ensure they reach their financial goals. But in the meantime, al single and unmarried couples should consider the following:
Discuss how household expenses will be split: In households with one or more unmarried individuals, the first logical step in the money discussion is how you’ll handle household expenses in light of your respective incomes. If you’re setting a lifetime plan, it’s definitely appropriate to discuss your respective salaries and how to budget those household expenses so you’ll have savings to play with.
Talk about debt: The best gift two people can present to each other before they move in together is full disclosure on their respective finances. If one or both partners have significant student, credit, business, mortgage or other debt, those amounts need to be brought into the open and an agreement made on a repayment plan. Start by pulling your latest credit reports –for your free annual series of reports, go to www.annualcreditreport.com.
Take special care when buying property: If you buy a home together, get some advice on how each of your will protect your right of ownership. See if it makes sense to own the property as joint tenants with right of survivorship (JTWROS) or tenants in common. A real estate or estate planning attorney is worth the money here.
Talk about the kids: If one or the both of you are bringing children into the relationship, or if you plan to adopt, you’ll need to cover all the emotional, logistical, legal and money issues associated with new or blended families. You need to know how your partner’s childcare obligations will affect your joint finances and estate plans. Unmarried and same-sex couples need to be particularly circumspect about estate and child custody issues if one or both partners die suddenly. Depending on state law, the custody of the children may be contested by parents or other close relatives if the correct legal provisions are not in place. And if there are grown children or grandchildren who might have been promised certain assets, that’s a particularly important issue for discussion.
What about retirement? At whatever point in life you’re entering a relationship, you need to discuss not only how set you are for retirement but what you hope your retirement will be. You should talk about assets in your 401(k), IRA and other investment accounts. If one or the both of you haven’t taken any steps to plan for retirement, you’re going to need to change that, even if you have or want kids. Also, if you vary widely in age, it’s particularly wise to ask for advice since one spouse will be retired long before the other and that will present a big change to household finances.
What is your estate plan? It’s never too early to think about the possibility that one of you might die suddenly or be incapacitated. Many people wait until they’re married to get wills, durable powers of attorney, health care directives and life insurance/retirement plan beneficiaries in order, but if you have a specific desire for a non-legal partner to gain custody of your children, your assets or the direction of your business, make time now to talk to an experienced tax professional, estate attorney and most important, an experienced family rights attorney.
Information for this article provided by the Financial Planning Association. |
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