The legalities of living together -- Page 2

If a couple living together purchases a house as a team, only the Social Security numbers on the 1098 forms may claim the deduction. When both parties put their names on the line, they should proportion their tax deduction according to the amount they pay. So if one person chips in 70 percent, his tax return may include 70 percent of the mortgage interest deduction available.

"As time goes on, it may be that one person starts making more money, so their ability to maximize the interest deduction may wane," says LeValley. "In that case you may want to do some switching. Have the higher earner pay bills that aren't deductible anyway and let the person who can best take advantage of the mortgage deduction handle that payment."

And in living arrangements when one person pays for more than half of the other's total support and that partner earns less than $3,200 a year, the party footing the bills can claim head-of-household status on his or her tax forms. As an added perk, if the person claiming head-of-household status buys insurance plans through an employer for the partner, those payments become tax-deductible.

The estate
Like a vast majority of Americans, Overton and Stewart haven't committed their final wishes to paper. Details such as who makes life-and-death medical decisions and who gets which portion of the estate lie in limbo at the moment. But unlike their married counterparts, they're flying without a legal safety net.

Many cohabiting couples mistakenly assume there's a magical point where the legal system fades out of their business.

"They may feel like an old married couple, but legal rights don't automatically come along at certain milestones," says Miller.

In fact, should one fall ill or die, the courts won't give the partner any more weight than the man in the moon. So without a written will or power of attorney, your next-of-kin whom you've not spoken to in 20 years may still get the money and power. Heck, leave it to the law and your cousins will get a share of the loot before your loved one.

The good news is this step doesn't need to be any more complicated than filling out a form downloaded from the Internet and signing it before witnesses. Miller doesn't recommend bringing in a lawyer unless the estate exceeds $1 million.

Everyday life
When it comes to houses, bank accounts, cars and credit cards, Miller is cool with cohabitants combining their monies. Others, such as Wynne Whitman, an attorney with Schenck, Price, Smith and King in Morristown, N. J., believe it's wise to take Stewart and Overton's route and keep everything separate. But both agree couples who live together should complete a cohabitation agreement to back up their planning.

"It doesn't sound sexy at all," Miller says, "but essentially you're just outlining any property you brought into the relationship that you want to consider yours."

Don't worry about fancy lawyer phrases -- a piece of notebook paper and plain language with both signatures at the bottom will hold up in court, says Doskow.

Be sure to spell out ownership, how to split household expenses and rules for use on joint items like credit cards. Finally, write out what happens if you break up, including areas such as how quickly to cancel credit cards and whether to seek mediation, arbitration or the courts should you come to loggerheads.

Again, such documentation can save you from the state's meddling. In some states, not necessarily those that confer common-law marriage, community property laws mean without any agreement, each party gets 50 percent of the combined accounts should they bid each other farewell.

"The conversations you force yourself to have will do amazing things for your relationship," says Miller. "Which isn't to say you'll never have another fight again about money, but when disagreements come up, you have an outline of the expectations."