Let’s Talk About Women and Common Law Marriage and Coexisting Relationships
During my decades as a female financial advisor working with female clients, I’ve had many female clients who were unsure about Common Law Marriage and whether it would benefit them or not.
One thing is for sure, through Financial Coaching, Retirement Planning, and Investment Management, my clients know their future is brighter, whether married or not.
In the game of life, marriage is often seen as a coveted 'get out of jail free' card. Some kind of a surefire route to companionship and financial security later in life that we hold up to incredibly unrealistic standards. But what if the rules of the marriage game start to change?
As more people reject traditional marriage and choose cohabitation, it's crucial to understand the legal and financial implications of such decisions. Couples of all ages, especially those that have already lived a few lifetimes, know how hard it is to merge assets. Something as simple as a joint checking account can quickly get complicated when it comes time to pay for groceries.
Enter the labyrinthine world of common law marriages, coexisting relationships, and domestic partnerships. If you are living in a unique relationship that is considered ‘outside the norm,’ here is some crucial information to consider.
The Misconceptions of Common Law Marriage
Common law marriage often invites confusion and misinterpretation. It isn’t easy to let the awkward stares of the local knitting circle roll off your back when you try to explain why that same man lives with you outside of traditional marriage, even though you are happier than ever.
Let's debunk some pervasive myths about common law marriage:
- Cohabitation Equals Common Law Marriage: Simply living together doesn't automatically result in a common law marriage. According to LegalJobs, couples should meet specific criteria to be recognized as common-law spouses, including living together for an unspecified period, intending to be married, not being married to someone else, being of legal age, and presenting themselves as a married couple to society.
- Equal Property Division: The notion that property purchased by a common-law spouse will be split 50/50 in the event of a breakup is a fallacy. The division depends on the couple's agreement, applicable state laws, and whether they can demonstrate a common-law marriage. In most cases, without an official marriage license, you don’t have ownership of someone else’s purchased property without a contract.
- Adopting a Child: If a cohabitating couple has a child, they don't have to adopt the child. Legal parentage depends on biological ties and the rules of the state where they reside. You don’t need to be married to be considered a mother or father in the eyes of the law.
- Asset Inheritance: The idea that all assets automatically pass to the surviving spouse in case of death or disability is incorrect. Without a will or other estate planning document, assets may be distributed according to state laws, which might not recognize the common-law spouse. Again, in most cases, the state will assume ownership to handle all your debts and then look for a “next of kin,” which tends to be a close sibling, parent, or child.
- Common Law Divorce: There's a misconception that you can simply walk away from a common-law marriage. While the process may differ from traditional divorce, you'll still need a legal dissolution if the state recognizes your common-law marriage.
Defining Common Law Marriage
Common law marriage is a legally recognized marriage without the pomp and ceremony of a traditional wedding. It's not about living together for a certain number of years. Rather, it's about holding yourselves out as a married couple, which includes sharing the same last name, filing joint tax returns only if you have filed for a legal Domestic Partnership, IRS does not reconize common law marriage, and referring to each other as 'husband' or 'wife.'
The “holding out” principle is pretty crucial to common law marriage. Even though you might not have had the big ceremony, you demonstrate to the world that you are married. That presentation has a lot to do with the precedent legal cases you can search for online. When you spend many years acting as a married couple, the courts tend to view you as one for certain financial matters.
Exploring Coexisting and Domestic Partnerships
The line between common-law marriage and cohabitation can blur. Cohabitation, or coexisting, simply involves two people living together in a romantic relationship without being legally married. Unlike common-law marriage, cohabitation doesn't give the couple any legal rights or responsibilities towards each other.
Domestic partnerships, on the other hand, provide some legal benefits similar to marriage. They were initially designed for same-sex couples who couldn't legally marry, but are now also available to opposite-sex couples who choose not to marry.
A good portion of the U.S. doesn’t want a religious ceremony. For whatever personal reason, these couples want to be married legally, but without any notation of God or higher power being in charge of their relationships. Many of these couples turn to domestic partnerships as a viable option.
Interestingly, Pew Research reports that a larger share of adults have cohabited than have been married, and 69% of Americans consider cohabitation acceptable even if a couple doesn't plan to marry. In other words, it has become way more socially acceptable to just be in a happy relationship. Safety, happiness, and security matter way more to today’s population.
Geographic Nuances of Common Law Marriage - Which States Have Common Law Marriage?
Common law marriage is not recognized nationwide in the United States. There is no federal standard to define or acknowledge common law marriages or cohabitation as a legal standing for most asset allocation or financial matters. That isn’t to say it’s impossible, just that going through a federal court is implausible.
On the other hand, a few states acknowledge it. They include:
- Alabama
- Colorado
- District of Columbia
- Georgia (if created before 1997)
- Idaho (if made before 1996)
- Iowa
- Kansas
- Montana
- New Hampshire (for inheritance purposes only)
- Ohio (if prior to October 1991)
- Oklahoma
- Pennsylvania (if created before September 2003)
- Rhode Island
- South Carolina
- Texas
- Utah
Thanks to LegalZoom for that quick list!
Each state has its own specific requirements, so be sure to understand your state's laws if you're in a cohabiting relationship. Even though these states recognize common law marriage, in many cases, like Utah, they only apply to relationships before a specific date. That is because there is massive pushback to eliminate the practice altogether.
Financial Considerations in Common Law and Cohabiting Relationships
From managing expenses to dealing with debt, your relationship status can impact your finances significantly. Being in a cohabiting relationship, a common law marriage or a domestic partnership requires thorough financial planning. Here are some aspects to ponder:
- Combining Expenses: Merging finances with your partner can be tricky. It's essential to have open and honest discussions about how you'll handle joint expenses, whether you'll maintain separate accounts or open a joint account, and how you'll manage your savings and investments.
- Partner’s Debt: Entering into a relationship with a partner carrying substantial debt can indirectly affect your financial plans. While you're not legally responsible for your partner’s pre-existing debt in a cohabiting relationship, it can influence your shared financial goals.
- Community-Property State Implications: If you live in a community property state, understand that assets and debts acquired during the relationship will be considered jointly owned. This arrangement can impact your financial planning. These states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
- Prenuptial Agreements: These aren't exclusive to traditional marriages. If you have significant assets or children from a previous relationship, a cohabitation agreement, similar to a prenuptial agreement, can protect your interests.
- Insurance Considerations: In a cohabiting relationship or domestic partnership, your partner may not be eligible for benefits under your insurance policies. Investigate options for health and life insurance coverage for both of you.
- Tax Planning: As unmarried couples can't file joint tax returns, seeking professional advice is crucial to ensure you're using the optimal tax strategies.
- Creating a Last Will and Testament: Without a will, your assets may not be distributed according to your wishes upon your death. A legally valid will ensure that your partner, especially in a cohabiting relationship, inherits the portion of your estate you intend for them.
- Durable Power of Attorney: This legal document allows you to appoint your partner (or someone else) to manage your financial affairs if you become unable to do so. It can be particularly crucial for cohabiting couples, as the law doesn't automatically grant them these rights.
- Medical Power of Attorney: Similar to the durable power of attorney, medical power of attorney designates your partner to make medical decisions on your behalf if you cannot. Again, cohabiting couples should pay particular attention to this, as they don't have the same default rights as married couples.
Understanding these financial considerations can help you navigate the murky waters of cohabitation, common law marriage, and domestic partnerships. As you chart your course through this journey, don't hesitate to seek legal and financial advice.
At Meyers Financial Services, our team is dedicated to helping you make informed financial decisions that cater to your unique circumstances. Contact us today for expert guidance.
Charting Your Course
Deciding to cohabit, enter a common-law marriage, or form a domestic partnership can have lasting implications. Understanding the potential financial and legal consequences of your relationship status is essential.
As you navigate this journey, remember to seek legal and financial advice when necessary. At Meyers Financial Services, we're here to guide you through the complex labyrinth of finance. Whether you're cohabiting, considering common-law marriage, or are in a domestic partnership, we're here to help you make sound financial decisions.
We work with women in many forms of partnerships to ensure you, your family, and anyone else you want is considered in your financial plan. Get in touch with us today, and let’s build a financial future!
Book a Call today and let’s discuss your options.
Lillian Meyers CFP®, CDFA®, EA is a Financial Planner for Women helping clients live their best life through the use of financial planning, investment management, and other sophisticated financial options.