| When
it pays to stay single | | |
| "Say you had an unmarried
couple and each partner kept an old condo and rented it out. They each would have
a $3,000 to $4,000 write-off each year. But a married couple with $200,000 adjusted
gross income cannot take any of those losses against ordinary income."
A $100,000-per-year income level
is not that unusual for investors looking to get into today's escalating real
estate market, says Hobbs. That means married rental-unit owners in her Southern
California location often lose out on expected tax benefits. Taking
care of the kids
Then there are the kids. Both minor children living at home and
adult offspring who are long gone can muddle the married versus
living-together equation.
When it comes to obtaining federal financial aid
for college, being unmarried offers an advantage, albeit one that many parents
might not be comfortable taking. "If there's a child where
one adult is the legal parent and the other isn't, by law you don't have to report
the income of the nonparent, but there are ethical considerations," says
Garrett. "The FAFSA
form literally asks for the information on the father and mother. If there's
no legal mother or father, you're answering it correctly. But if the partner is
helping or will help pay for the schooling, that's something you probably should
consider in answering."
A more-emotional issue for many unmarried couples
is grown kids from previous relationships.
"One of the biggest reasons that some older people
choose not to remarry is because of the family dynamics, whiplash
or backlash from adult children," says Garrett. "'This
new person in a parent's life might be really charming and attentive,
but might just be after Mom or Dad's money, our inheritance.'"
In
such cases, Garrett has some unequivocal advice for the kids: "Get your noses
out of your parents' business and let them get on with their lives." Farber
agrees that emotional issues "are almost always going to take the front seat."
But, he says, "financial issues you can deal with; you can come up with solutions."
One of the easiest solutions: basic estate planning. "You
have to have a will or trust in place to direct where your assets will go, regardless
of whether you're married or just living together," says Garrett. "If
you're married, you can say where you don't want them to go. If you're not married,
you can determine where they will go."
This explicit distribution direction is necessary
because without it, the state decides. In some states, if you stay
unmarried and have no will or trust, your assets will go by default
to your next of kin, your children. Your partner will get nothing.
Conversely, if you marry and don't have a will or trust, you new
spouse will get it all, leaving your kids without an inheritance.
Other states follow the Uniform Probate Code, which calls for splitting
the inheritance for people who die intestate.
"Put in place a living
trust that spells out that my partner will get this and my kids will get this,"
says Garrett. "Put all that in print so that it's not left open."
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