Six short words guaranteed to piss off many folks who haven’t tied the knot. But that’s what everyone demanded of me daily eight years ago. In two weeks, I broke every rule to adulting: I quit my job, moved to a new city with my partner, started a business, and kicked off my first home search. Friends and family kept asking. I wanted to respond with a prying question about their nighttime activities, but I was sensible back then. The truth is, I didn’t want to get married.
But they had a point.
Life is hard for unmarried couples. Marriage is the default marital status in the US--in legal matters, finance, insurance, estate planning, healthcare, taxes, government assistance, and property ownership—the main driver of household wealth.
Practically, married couples enjoy legal rights, protections, and benefits denied to unmarried couples. Why?
Modern households are diverse
Surely, most households are headed by a married couple, and unmarried couples make up a tiny fraction of the US population. Right?
Negative. The proportion of married couple households is down to just 46%, traditional nuclear households have fallen to 18%, and cohabitating couples are on the rise:
7% of all households
10% of all home purchases this year
Growing at 3.5x the rate of married couple households
For the first time, one-quarter of 40-year-olds have never been married. So what’s up? Most folks want to get married, but they’re blocked. Research from the American Survey Center nails it:
This trend is a reversion to the norm more than a cultural shift
Starting a family today is expensive
Young people have little faith in “formative institutions”
In other words, the system is broken.
The not-so-traditional nuclear household
If extraterrestrial beings were to land on Earth tomorrow, our societal norms might appear as chaotic as a chimpanzee circus to them.
Given our current one-size-fits-all approach to homeownership, one might naturally assume that throughout history, all homeowners were married couples. However, this assumption would be incorrect. It's a sobering fact that until as recently as 1920, women were not even legally permitted to vote or own property in their own name.
In the time since, humanity has achieved remarkable feats such as landing on the moon, mapping the human genome, and transmitting high-resolution images from the farthest reaches of space. Yet, we still grapple with societal structures that favor certain groups while disadvantaging others.
We’ve even developed a vocabulary to reinforce our bullsh*t, coining loaded terms like mortgage before marriage and traditional nuclear household.
“The nuclear family became the most common form in the U.S. in the 1960s and 1970s…The concept that narrowly defines a nuclear family as central to stability in modern society has been promoted by familialists who are social conservatives in the United States, and has been challenged as historically and sociologically…”
The earliest modern humans lived in groups of 20 to 50 individuals composed of extended family. The “nuclear households” of Renaissance Europe included multiple generations and servants, as did those in Victorian England. So not quite nuclear, then.
The great irony? Marriage is a relatively recent phenomenon, legal property rights for women are practically brand-spanking-new, and we chose the wrong template for homeownership.
Homeownership hurdles for unmarried couples
Unlike married couple homeowners, unmarried couples lack automatic legal rights, protections, and benefits. This little detail impacts every aspect of owning a home and building wealth through traditional means.
The obvious elephant in the living room is the possibility of a breakup. Breaking up, though, is only the tip of the iceberg.
Asset and liability management
Understanding both the asset and liability sides of co-ownership is crucial. Partners need to know who owns what and who owes what. If a mortgage or other liability is in one person's name, they may bear a disproportionate risk. Similarly, if the property title is in one person's name, the other may not be a legal co-owner.
Different types of participation, such as co-owners, co-borrowers, occupants, non-occupant investors, co-signers, and creditors, further complicate this landscape. Each role carries distinct rights, responsibilities, and risks.
Joint financial accounts can streamline payments, but they can also introduce risk and require oversight. More generally, comingling assets--intentionally or otherwise--can cause trouble and carry tax implications. While most of us may struggle to imagine our partner engaging in nefarious financial activity, a recent study found that 43% of partnered Americans have committed financial infidelity.
Unlike married couple homeowners, Unmarried couples don’t benefit from unlimited gifts between partners or an unlimited deduction for estate tax purposes. They also need to work out who will claim eligible tax deductions.
Lack of legal clarity
Some states have limited the rights of unmarried co-owners based on a view that relationships between partners who co-own property are “immoral” or “illicit” by nature. Requirements and treatment of co-ownership agreements also vary from one state to another. States like Texas require agreements between parties to be written, while California and Washington take different approaches. A loose collection of statutes, rules, and court decisions shape how various jurisdictions treat homeownership involving partners who aren’t married.
Unmarried co-owners can face challenges in healthcare decisions and benefits. Without the legal status of marriage, they may lack the right to make medical decisions for each other or to access one another’s medical records in emergencies. They may also be ineligible for spousal benefits under Social Security, Medicare, or health insurance policies.
Without the legal protections of marriage, estate planning is vital. Co-owners must set up powers of attorney, plan for wealth transfer, and designate beneficiaries. Without these, an owner's share of the property could end up in probate or pass to an unintended recipient.
Unmarried couples need to be diligent in their documentation. They face a much higher bar for record-keeping and accounting than married couples. For instance, if a mortgage is in one partner's name, only that partner can claim a deduction for mortgage payments and interest, even if the other partner made financial contributions. Likewise, parties should properly document ownership interest in the property.
Disputes and breakups
Marriage is a legal contract. In case of a dispute or divorce, there are established processes for petitioning, court orders, and dividing assets through equitable distribution or according to community property laws, depending on the state. The legal framework prescribes a sequence of events to get this done. Things can and often do get messy in divorce. But a framework exists. The same isn’t true for unmarried couples.
Despite the growing trend of joint homeownership, social stigma still exists in some places. We’ve encountered professional service providers in and around residential real estate who don’t bother hiding their opposition to unmarried couples cohabitating. Unfortunately, some folks are still operating in the dark ages.
Notes from the field
We’ve worked with many unmarried couples over the last six years. It’s not all about the breakup or disaster scenarios.
1. Unmarried couples want help with day-to-day co-ownership management.
We recently surveyed 1,419 US-based co-buyers and co-owners, with unwed partners accounting for 29% of all respondents. When asked where they most need help to manage shared homeownership, respondents point to co-ownership agreements, finances, documentation, and even rights and responsibilities. Exit strategy ranked near the bottom of the list.
Folks require help to create an exit plan but place greater importance on immediate needs versus future-proofing.
Imagine that each co-owner spends 10 minutes daily managing, troubleshooting, and dedicating time to co-ownership.
10 minutes x 365 days x 2 co-owners = 122 hours per year
If you make $75k a year, that’s nearly $5k a year in earnings equivalent. This figure excludes lost time, opportunity cost, stress, and compounding interest.
2. Every situation is different.
In our first Co-buying a Home Report, we surveyed 476 US-based co-buyers—friends, family members, unmarried couples, and combined groups. Our sample set showed a higher incidence of unmarried couples co-buying together with at least one other friend or family member than unmarried couples co-buying as a pair. These are two very different dynamics. It’s like playing Catan against your honey bunny versus playing a full table.
These responses track with our experience. Different group sizes and compositions affect dynamics, which impacts where folks need help.
3. For many couples, this isn’t their first rodeo.
Some have previously owned a home, been through a divorce, and have kids from prior relationships. These folks are generally more risk aware. They’ve been through decoupling before and are serious about protecting themselves, their children, and their partner.
Steps you can take
Romance and ROI can and should coexist. Do tough discussions sound unsexy? Imagine what can go wrong compared to what can go right: building wealth and smooth sailing.
1️⃣ Get crystal clear…
Who is involved
Scope of participation
Roles, rights, and responsibilities
Expectations and limits
2️⃣ Frame your objectives…
How do we de-risk our investment?
How do we protect each other?
What actions improve the return on investment of time, money, and social capital?
3️⃣ Communicate openly and often…
List the worst cases
Agree how to handle the good, the bad, and the ugly
Identify what works and what doesn’t
4️⃣ Do the work…
Define an exit strategy
Develop your financial plan
Co-create a Co-ownership Agreement
Setup a document management system
Execute Wills, Health-care proxy, HIPAA medical releases, and durable powers of attorney
We trust each other, so why do we need to get everything in writing?
The IRS, probate, the government, your lender, insurers, and others aren’t interested in whether you trust one another. The system is not for unmarried co-owners. Your relationship can thrive, and still, there are situations where not having documentation can snowball into a giant problem. Treat documentation like your passport on a trip to Russia. Don’t get caught without it.
What’s the difference between a Co-ownership Agreement and a cohabitation agreement?
Co-ownership Agreements are more specific in scope and offer greater legal clarity. Cohabitation agreements are not unique to the co-ownership of real property and are often broader in scope. The two aren’t mutually exclusive, though creating and maintaining both may be redundant. If you co-own a home, you need a Co-ownership Agreement.
How do we approach making unequal financial contributions?
Make a list of all recurring expenses (mortgage payments, utilities, taxes, insurance, etc.) and non-recurring expenses, agree on how you’ll split these, and align on the mechanics of payment. Document everything in your Co-ownership Agreement and update it as needed. You should also provision for unexpected expenses such as maintenance, repairs, and emergencies by creating and funding a Reserve Account.
What about other types of contributions?
It’s common for co-owners to make non-financial contributions of time, work, or skills. Get on the same page about what each party will bring and set clear expectations. You may consider assigning a monetary value to non-financial contributions such as domestic work, renovations, or caretaking. Be sure to document everything in your Co-ownership Agreement and keep it up-to-date. In certain situations like a breakup, job loss, audit, or death, proof of individual contributions prove invaluable.
What if the deed or mortgage is in my name only?
A co-owner who isn’t on Title is probably not a co-owner. We’ve seen many instances of unmarried couples relying on their real estate agent, loan officer, and title company at the time of purchase, only to learn later that one of them is effectively a renter. Not documented? It didn’t happen. Be mindful that any changes to participation on the deed or modifications to Title could trigger a due-on-sale clause and a taxable event.
Why do we need to track expenses?
To protect your relationship, home, and largest asset. And because the IRS says so.
Everyone should have access to homeownership, regardless of background, orientation, or living arrangement. The system is broken and needs an overhaul. We’re fixing it.
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