The Money with Katie Show – Episode Summary: "How Unmarried Couples Can Protect Their Finances"

Release Date: November 11, 2024
Host: Katie Gaddy Tossan & Executive Producer Hannah (Morning Brew)

Introduction to the Episode

In this insightful episode of The Money with Katie Show, host Katie Gaddy Tossan and her executive producer Hannah delve into the financial intricacies faced by unmarried couples. As societal norms shift and more couples choose to cohabitate without tying the knot, understanding how to protect joint finances becomes paramount. This episode addresses listener questions, provides expert insights, and offers practical advice for couples navigating their financial futures together without marriage.

Listener’s Question: Cassie’s Situation [03:14]

The episode centers around a thoughtful question from Cassie, an unmarried woman in a long-term relationship with plans to start a family. She shares:

"With a one-year-old and another little one on the way, my partner and I managed to reined in our spending and are prepared to accommodate an additional eighteen hundred dollars in monthly daycare expenses for our second child starting next spring. However, despite our financial planning, we don’t have legal arrangements to protect ourselves if the relationship changes."
— Cassie [03:14]

Cassie’s query highlights the uncertainty and vulnerability that unmarried couples may face, especially when children are involved.

Cohabitation vs. Marriage: Understanding the Differences [05:16]

Katie and Hannah explore the growing trend of cohabitation, noting its prevalence in other countries and its implications in the United States. They discuss how cohabiting couples often lack the legal and financial safeguards that marriage provides, leading to potential instability and financial risk.

Hannah [07:19]:
"It's important that we do not conflate or feed into the moral panic that every person with children needs to be married. Financial stability and responsibility are separate considerations."

Legal Protections for Unmarried Couples

Cohabitation Agreements [10:50]

The hosts introduce cohabitation agreements as a pivotal tool for unmarried couples to outline financial responsibilities and protect each other in case of a breakup. Unlike marriage, where assets and debts are typically shared by default, cohabitation agreements allow couples to specify terms akin to prenups.

Hannah [11:04]:
"A cohabitation agreement can specify terms about partner support, property ownership, wills, custody arrangements, and child support, ensuring that both parties are protected."

Child Custody and Paternity [14:04]

Katie emphasizes the importance of establishing paternity for children born into unmarried partnerships, as it affects child support and legal rights.

Katie [14:04]:
"In unmarried couples, the child's paternity must be established through DNA or genetic testing, which is not required in marriage where the legal father is presumed."

Healthcare and Incapacity [15:09]

The discussion extends to healthcare decisions, highlighting that married partners automatically have rights to make medical decisions for each other, whereas unmarried partners must explicitly grant power of attorney.

Katie [15:09]:
"If your partner becomes incapacitated, being married allows you to make decisions for them. Unmarried couples need a healthcare power of attorney to ensure this."

Inheritance and Wills [16:12]

Without marriage, partners do not automatically inherit each other’s assets. Creating a will is essential for unmarried couples to designate beneficiaries and manage inheritance.

Hannah [16:49]:
"Married couples inherit each other's assets by default, but unmarried couples must create wills to ensure their wishes are respected."

Financial Planning Tips

Property Ownership and Debt Liability [10:50]

Katie explains how property ownership differs between married and unmarried couples. While married couples share liabilities for debts, unmarried partners remain individually responsible unless otherwise specified in a cohabitation agreement.

Katie [10:58]:
"Married people can be held liable for each other's debts, which isn't typically the case for unmarried individuals."

Tax Implications [18:29]

The hosts touch upon the tax benefits of marriage, such as the potential for lower tax liability through joint filing, which is unavailable to unmarried couples.

Hannah [19:12]:
"Married couples benefit from lower tax liabilities, a consideration that often encourages marriage in the U.S."

Social Security Benefits [19:17]

Social Security offers survivor benefits to married partners, which can be a significant advantage for financial security in later years—a benefit not extended to unmarried couples.

Hannah [19:17]:
"Married individuals are entitled to survivor benefits from Social Security, an important consideration for long-term financial planning."

Conclusion and Final Advice

Katie and Hannah conclude by reiterating the importance of proactive financial planning for unmarried couples. They advocate for consulting with a family law attorney to draft cohabitation agreements and ensure all legal protections are in place. This approach allows couples to enjoy the benefits of their relationship while safeguarding their financial futures independently.

Hannah [16:49]:
"A family law attorney can help you create a cohabitation agreement that outlines all necessary protections tailored to your specific situation."

Notable Quotes

• Cassie [03:14]:
  "I have a solid plan to pay down most of our debts in the next three years while supporting two kids in daycare. I feel empowered and excited for our family's future."

• Hannah [07:19]:
  "It's important that we do not conflate or feed into the moral panic that every person with children needs to be married."

• Katie [10:58]:
  "Married people can be held liable for each other's debts, which isn't typically the case for unmarried individuals."

• Hannah [19:12]:
  "Married couples benefit from lower tax liabilities, a consideration that often encourages marriage in the U.S."

• Hannah [19:17]:
  "Married individuals are entitled to survivor benefits from Social Security, an important consideration for long-term financial planning."

Final Thoughts

This episode of The Money with Katie Show serves as a crucial guide for unmarried couples seeking to secure their financial well-being. By understanding the distinctions between marriage and cohabitation and utilizing legal tools like cohabitation agreements, couples can protect their assets, ensure fair arrangements for their children, and plan effectively for their future together—or apart.

For more detailed financial strategies and personalized advice, listeners are encouraged to consult with financial planners and family law attorneys.