Why Clients Should Have a Financial Agenda Before Cohabitating - Part Two

Make sure your clients have considered the financial, emotional and legal implications of "officially" moving in together before they take the plunge.

By Valentino Sabuco, CFP®, AEP®

Key Takeaways:

  • The latest U.S. census data show there are now more nontraditional households in America than at any other time in our nation’s history.
  • Financial planning issues have never been more complicated for soon-to-be-joined couples—especially when one or both members of the couple are affluent.
  • Depending on how your clients responds to questions about their financial position, age and health, chances are their estate plans, financial plans and other legal documents need updating.

READER NOTE: The third week in October is National Estate Planning Awareness Week. Visit http://www.thefinancialawarenessfoundation.org for more about important financial awareness campaigns and how you can use these initiatives to build your practice.

As we discussed in Part 1 of this article series, couples that are planning to move in together should have a serious discussion with their financial advisor about why they’re planning to cohabitate. They should also make sure they’re in sync with each other about personal, career, financial and family goals. Couples should also be very open about each other’s health status and any prior financial commitments they may have. Here are eight more key questions that soon-to-be-official couples should discuss with their financial advisors ASAP:

9. What are each partner’s assets, liabilities and income? Make sure each partner gives you and the other partner a list of all assets and debts. Include everything, along with a copy of the last two years’ income tax returns. Talk about how much each earns and other sources of income (e.g., rental from a property or income from a trust fund).

Discuss debts in detail (how does each partner plan to pay them off?) and credit ratings. Bring up prior financial problems such as an inability to handle debt or a bankruptcy.

10. Does your client want or need a cohabitation agreement? This may be a delicate topic, but you should address it head-on, especially if one partner has greater assets than the other.

11. How might wills, trusts and/or health care directives and powers of attorney be handled? Will each partner name the other as the primary beneficiary of their assets, life insurance and retirement plans? If there are children from a prior marriage, who will be the primary beneficiary? Who should be the one to take care of matters should something happen to either of them? If one partner has a larger estate, marriage may provide some estate-tax savings. Talk it out until you agree on what’s fair.

12. Do they share ideas about savings and retirement? Discuss attitudes regarding savings for the short term and the long term. Are they savers or spenders? When are they each planning to retire? What resources do they have for retirement, and how do they want to live it?

13. How do the client and their partner manage finances? Will they keep separate bank and investment accounts, have only joint accounts, or have something in between?

If they use joint bank accounts or hold title to assets in both their names, then that can be used as evidence during a breakup that they had an “agreement” to divide up all of their assets. If your client is certain that they want joint ownership of some assets, be sure an attorney drafts provisions in a written agreement specifying who owns what and what happens in the event of a breakup. The agreement should also provide guidance about handling money transfers to the other. Be sure the terms of a gift or loan are clearly stated to avoid misunderstandings later if there is a break up.

Who will pay the bills? How will expenses be divided? Will each partner do this equally or based on income, or will everything be paid by one? Will your client and their partner invest together or separately?

Make sure to talk about feelings toward debt. Is one comfortable taking on obligations while the other treats it like the plague? If so, how will this be handled?

Be careful about having both names on a credit card. Will each partner be liable for what the other one charges. If so, credit ratings can be at risk. Make sure your client understands that if they decide to sign a joint credit card application, they should cross out the word “spouse” and substitute “co-applicant,” so you are not being presented to the world as a married couple.

14. What is each partner’s approach to financial risk? Is one a risk-taker and the other risk-averse? Can the two live together without driving each other crazy? Are they willing and able to make changes?

15. Do your client and their partner have insurance? Find out how much and what kinds of insurance each has. Are they both insurable? Can either qualify for any additional coverage through an employer?

With homeowner’s insurance, both partners will be on the policy if they co-own their residence. If only one is an owner, then the other needs to be named as an additional insured or have renter’s insurance.

As most advisors know, if each partner owns cars, the insurance company will want to issue two separate policies. That will cost more because you won’t get a multiple car discount. If they decide to co-own each of their cars, determine the potential liability if one partner has a car accident. Find out how well they’re covered if they’re driving someone else’s car (including rental cars). Have an attorney cover the issue of ownership of the cars.

Each partner should have umbrella insurance to provide additional protection beyond the car and homeowner policies.

16. What names will the partners use? Is either taking on the other’s last name? Will one be doing so? Be careful when one takes on the other’s name, calling one’s partner a “husband” or “wife” or presenting oneself as a married couple. Each of these actions may be used to support an argument for a division of assets and support payments if they break up.


An estimated 120 million Americans do not have an up-to-date estate plan to protect themselves and their families. This makes estate planning one of the most overlooked areas of personal financial management. To help you and your clients keep their estate and financial plans current, please note that the third week in October each calendar year is National Estate Planning Awareness Week and April is National Financial Literacy Month. To learn more about how you can participate in these important financial awareness campaigns as a business development tool visit here.

About the Author

Valentino Sabuco, CFP®, AEP®, is the executive director and publisher of The Financial Awareness Foundation, a 501(c)(3) nonprofit located in Sonoma County California. Valentino has pioneered the financial planning profession for over 40 years. TFAF serves as a nonpolitical and neutral “financial awareness advocate” for the public, the professionals and their associations, educational institutions, and nonprofits. Our mission is to significantly help solve a major social problem by dealing with the lack of financial awareness and financial literacy. We believe teaching financial literacy is very important as it gives people the essential tools to address everyday financial decisions in a more informed manner. Valentino can be reached at V.Sabuco@TheFinancialAwarenessFoundation.org or (707) 586-8620.