The concept of living together has its roots in the protest counter culture of the 60s.  It was born of a notion that the conventions of the establishment weren't really necessary for successful domestic partnership and bliss. Yet in a perverse twist, couples who lived together avoided the bonds of marital law sure enough, but their relationship ultimately came under the purview of tort law. Their domestic relationship was in fact a business relationship – about as establishment as it gets.

It's this notion that gives relevance, context, and perspective to a new book by Sheryl Garrett, CFP and Debra Neiman, CPF called Money Without Matrimony (Dearborn Trade, 2005).

"Unmarried couples represent 11 percent of the population," says Garrett.  "And until they are wed – if they ever wed – they need to be aware of the differences in the laws and they need to face the same challenges that married couples do with respect to such issues as the transfer of assets, taxes, and estate planning." 

According to Garrett, the incidence of unmarried domestic partnership – in gay as well as heterosexual households – is rising so quickly and the interest in the financial issues that arise in such partnerships is on such an upswing that it makes it feasible to build a financial planning practice focused solely on this market.    

But rather than limiting yourself, Garrett suggests a more successful formula might be to develop some of the specialized expertise this market requires, which would enable planners to make meaningful inroads into what is indisputably a growth market. Garrett believes that as a target market, unmarried couples offer a good profile: middle age individuals in their peak earning years, often with a divorce on one side or the other, now in a double-income household, frequently with no kids. This panoply of variables offers several circumstances under which financial planning expertise can provide real and tangible value. 

For instance, on the risk side of the equation, unmarried couples frequently err when assigning ownership in a home or brokerage account to one another. "While this is usually done with the best of intentions," says Garrett, "these changes are taxable events, and need to be managed to reduce the overall tax burden." Moreover, she says, changes in home equity can provoke a response from lien holders and result in foreclosure.  

Another area that may require competent professional advice is protection of the biological children's inheritance. "Grown children often get upset when their older parents start living with someone else because it can and does put their inheritance at risk." While it's natural for people to couple up, says Garrett, "it's important to plan for the consequences of this likelihood." And still one other, among a myriad of issues that unmarried couples may face, is the potential loss of retirement or other benefits that they've earned through a deceased spouse. "Couples can unknowingly hit a tripwire and reduce or eliminate benefits, or perhaps qualify for survivor's benefits and not know it." 

Then there is the opportunity to capitalize on the rare advantages that unmarried couples can enjoy. "There is a loophole in the tax law," says Garrett.  "If one party makes more than the other, they can bunch all the deductions to the higher-income tax return, and all of the investment income or capital gains to the lower-income tax return. This allows the lower-income party to take the standard deductions and the higher income party to take the itemized deduction, which is a neat trick that married couples can't do." 

In short says Garrett, "financially, the deck is stacked against unmarried couples. But with a little planning, they can make the most of their financial resources, and, with some really good planning, can actually come out ahead."