Non-traditional couples can include same-sex partners or heterosexual couples who are living together but choose not to get married. People in these types of relationships often do not receive the financial benefits and protections of those who are married, so they need to take extra steps to secure their financial futures.
With a few notable exceptions, most companies do not provide health insurance for the non-married partners of their employees. This means that each partner will need to obtain it through his or her own employer, if available. If one partner doesn’t work, is self-employed or doesn’t have health insurance through his or her job, then insurance premiums will need to be paid out of pocket. This can be a big drain on the household budget, as individual insurance premiums are much higher than a group rate. It is a necessary expense, though, as the medical expenses of just one illness or accident can lead to financial ruin.
In addition, pension benefits are often available only for married spouses. Some pension plans will provide benefits if a common law relationship can be established, but this can take months or years to prove. Social Security does not currently provide benefits based on the income of a non-married partner. Therefore, if the non-traditional couple plans to grow old together, they need to save enough money to provide for retirement income outside of government and employer benefits.
If one partner relies on the other’s income to pay for day-to-day expenses, then it is vital that the higher income partner have a life insurance policy that designates the other partner as the beneficiary. If both partners contribute equally to the relationship as far as finances are concerned, then there should be policies for both partners.
Probably the most important thing that partners in a non-traditional relationship can do to protect each other financially is to have a written legal will. The will should give explicit instructions as to how the estate’s assets should be distributed in the event of death. In the case of married couples, if a person dies without a will in place, a person’s estate will usually go to the surviving spouse. If the deceased has no spouse, the estate would go to the next of kin, which may be the deceased’s children or parents. If a non-married person wants all or part of his or her estate to go to his or her partner, then those wishes need to be expressed in a will. A will is also important to protect the interests of children from a previous relationship.
Non-traditional couples face different financial planning challenges from those of married couples. With advance planning, they should be prepared for whatever life may bring.