Financial Differences between Married and Non-Married Couples

| October 14, 2015

When a couple decides to live together without getting married it’s a big decision. There are some things they should be aware of. For example, they are not eligible for many of the same government, employer, and tax code benefits that married couples get.

So, it’s a good idea to know these things before blindly making a decision to live together. 

What are some of the challenges that can arise?

First up is tax and retirement issues:

If you have a health insurance plan that offers domestic partner benefits, then those benefits your partner receives will most likely be taxable income to you. With married partners, it’s normally not taxable income.

In the area of tax deductions, you cannot combine your deductions or claim deductions for expenses paid by your partner, but couples married filing joint can combine itemized deductions.

Retirement planning is a big one; when it comes to how much you can deduct for contributions to an IRA, the income threshold levels for non-married couples are lower than married ones. This means non-married couples get phased out sooner for traditional IRA deductions than married couples do. The phase-out range for Roth IRA contributions is also more favorable to married couples than the non-married.

When it comes to employer pension plans, there is no income replacement for surviving non-married partners like there is for married ones.

Also, when a husband or wife passes away with an IRA, the surviving spouse beneficiary can do a spousal rollover. This means they can transfer the deceased IRA to their own IRA. This is a great feature, but is only allowed for married couples.

And Social Security benefits?

The general rule is you cannot get benefits off an unmarried partner’s earnings record. With married couples, if a spouse dies or there’s a divorce, you may be eligible for benefits.


Another issue is property ownership. There’s no formal process for non-married couples when they split up, like a divorce court. So they really have to be careful and put thought into how assets should be titled. For example, placing assets in joint tenants with rights of survivorship with your significant other has so many risks it isn’t even funny. Humor you?! Ok, what if you split up? They have full access to the money! What if they have an accident and get sued? Your joint assets are flapping in the wind and are at risk! What if your significant other didn’t add a dime to a jointly held account? The IRS might call this a gift and now you have gift taxes to deal with!!

Also, if you die without a will or a will substitute, your non-married partner has NO legal right to inherit your estate. It will go to your next of kin according to state law, and that includes the house you may be squatting in right now!

While we are trying to have a little fun here, you should be aware of these things beforehand. If you need help in this area, calls us at 815-455-6453.

Have a great day!

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.