There are plenty of reasons clients might be involved in a relationship without being married. Some may be same-sex couples living in states where such unions are illegal. Some clients may simply have been to that rodeo before and, for either personal or legal reasons, are ready to pass the second (or third, or fifth) time around.

Pamela Sandy’s own complex background — she married and divorced twice, raised kids alone, went back to college as an adult, ran a series of businesses and survived the illness and death of a man she describes as the love of her life — may be why she particularly likes to work with clients who lives don’t necessarily follow the dictates of tradition.

“People have been trained to think that they have to buy a house, have kids and plan for retirement. But just because everyone else is doing it, doesn’t mean you should too,” she says. “Tell me how you’d want to live your life if money was not a concern. We figure it out from there.”

At her Cleveland planning firm, Confiance, she estimates that more than half of her clients are living in nontraditional situations — whether gay or lesbian couples or older heterosexual couples who choose not to marry. She’s an Accredited Domestic Partnership Advisor, a designation originally created for advisors serving gay and lesbian couples who couldn’t marry. Though the Supreme Court is now weighing whether to grant gays the right to marry in every state, Sandy says the decision won’t change her practice.

SEPARATE BUT COMPLEX

That’s simply because no matter why clients decide to forgo the mixed blessing of marriage, the issues involved in being committed, but unmarried, remain complex.

Sandy draws from her own experience to explain. “I was in a six-year relationship with the love of my life, but I had been married twice and neither of us wanted to do that again,” she says. “We thought everything was fine until we brought him to the emergency room and the doctor asked what year it was. He said it was 1995” — this was a couple of years ago — “and I thought, ‘Oh, hell.’?”

He died of brain cancer late last year. Because they weren’t married, Sandy is not on the hook for his debts. “Our situation was about as clean as it could be. We never combined assets. When his credit card statements come in, I mark that he’s deceased and has no estate,” she says. “I am not obligated to pay them. If we were married, I would be.”

On the other hand, they needed health care directives and powers of attorney so Sandy could pay bills and help with medical decision-making while he was ill. Although Sandy knows that these were documents they should have executed earlier, like many of her clients, she needed a nudge.

“It’s a natural human condition to not want to think about your own mortality,” Sandy says. “The hospital was very proactive, which was great. Had that not been the case, as his significant other, it would have been a nightmare.”

ESTATE PLAN PAPERWORK

Not surprisingly, one of the first documents Sandy helps clients complete is an estate plan, and she starts with health care directives and financial power of attorney documents.

Clients who are unmarried need to spell out — in a way legal and other authorities will understand — who may speak on the client’s behalf in the event of a medical or financial emergency. Of course, these documents are also important for couples who do marry — it’s particularly true when children involved, and where custody and care could be in dispute.)

Even married clients should consider who they really want to step in and take responsibility, Sandy notes: Although state laws generally let a spouse act on your behalf if you’re sick and need help paying bills or making medical choices, a client’s spouse may not be mentally or physically prepared for the job. Adult children may — but a client might also want to allow a better-prepared friend or relative to take over.
Estate planning documents also help sort out a variety of thorny issues raised by second marriages, such as whether the assets that a client brings to the union get left to the spouse or to kids from earlier relationships.

Most clients wouldn’t want their children to be disinherited because of a new marriage. But leaving the estate to the kids could also leave a surviving spouse at risk in the weeks following a client’s death, forcing an eviction or an emergency sale to buy out the heirs. Proper documents that spell out a clients’ wishes can help families avoid these and other traumatic mistakes.

There are no right or wrong answers, Sandy says. Her specialty is encouraging clients to understand the risks and rewards of their personal choices and then strike out on their own path.
“Don’t let anyone tell you to follow the herd,” she says. “The thing that scares me is when people think that the solution is the same for everyone — that everyone wants the house, the kids, the dog, the cars.”

AWKWARD CONVERSATIONS

Sometimes that causes her to give atypical advice. For instance, she theorizes that it’s a planner’s fiduciary responsibility to remind young couples of the high cost of having children before they opt to procreate.

Want to buy a house, but have an unstable job? Sandy may tell you to think twice. Your ability to earn income is your most important asset, she says. Having to worry about selling or renting a house could make you less able to move to follow your work.

Another issue comes up when older couples choose to marry but want to keep their finances separate. Sandy reminds them that, depending on their state of residence, this may not be completely possible. Most significantly, if one spouse ends up needing costly long-term care, state health officials will look to community assets to pay the bills.

Although couples can undertake a series of legal strategies (or buy insurance) to protect assets for the healthy spouse, none are 100% effective, she says — particularly now that states have become increasingly aggressive about recovering outlays in their Medicaid programs. The only way to make sure one partner’s assets can’t be ravaged by medical costs is to simply forgo marriage, she says.

Of course, the choice to buy the home, marry or have kids is the client’s. But Sandy says she wants them to understand the trade-offs in advance. Once they do, it’s her job to facilitate their wishes — helping them allocate investments, procure insurance and make other financial arrangements — even if the choices aren’t those she would make herself.

A few years ago, for instance, a client who was going through financial difficulties told her he wanted to refinance his home to pay his son’s college bills. Naturally, she told him that wasn’t wise.

“But this client said to me, ‘Pam, I don’t care if I lose the house, I’m going to send my son to college.’ You may want to say, ‘That’s crazy; don’t do it.’ But what he’s really saying is this goal is that important. This is his No. 1 priority. So you make it happen.”

Kathy Kristof, a Financial Planning contributing writer in Los Angeles, contributes to Kiplinger’s and CBS MoneyWatch. Follow her on Twitter at @kathykristof.

This article has been updated. An earlier version said incorrectly that Sandy was a fee-only planner.

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