What Unmarried Couples Need to Know About Property, Taxes and Estate Planning

Across generations, more couples are choosing not to marry. While cohabitation has become increasingly common, unmarried partners still lack many of the property and tax protections afforded to married couples — making careful planning essential.

Many couples spend decades building a life together without formalizing the relationship through marriage. While that decision may reflect personal, financial or family considerations, it can also create planning challenges that are often overlooked until a crisis occurs. For couples who choose not to wed formally, the allocation of assets after the end of a relationship (or following the death of one member of a couple) is both complex and increasingly common.

The share of adults who are cohabiting has more than doubled since the mid-1990s, rising from roughly 4% to over 9%.¹ Yet while cohabitation is a growing trend, current property and tax laws still do not afford the financial protections to domestic partners that they do to married spouses. This is a significant issue not only for the impacted couples, but for their children as well.

Additionally, many unmarried couples assume that years together create legal rights similar to those of a married spouse. In many states, that is not the case. A surviving partner may have no automatic right to inherit assets, make healthcare decisions, remain in a shared residence or manage financial affairs unless those rights have been documented in advance.

These considerations can extend beyond a primary residence and joint bank accounts. Private business interests, investment portfolios, family trusts, vacation homes and multigenerational wealth transfer can create additional complexity.

What is the best way to plan for cohabitation?

Cohabitation agreements are an important planning tool for unmarried couples, as they share many characteristics of premarital agreements. These agreements can address such issues as: 

• The custody and support of children;
• Financial support in the event of dissolution of the relationship;
• The distribution of property in the event of dissolution of the relationship;
• Joint financial accounts; and
• Responsibility for debts.

Although cohabitation agreements can provide more flexibility than premarital agreements, they are not recognized by every state. Those who do enter into a cohabitation agreement and eventually marry and enter into a premarital agreement must note that the premarital agreement will override any terms set in the cohabitation agreement.

Without a legally binding document to put the couple's assets and wishes into writing, a judge will follow state and case law when considering the allocation of assets after one partner dies or the relationship ends. While some states do recognize common-law spouses, this is not universal. To ensure that each partner is protected, unmarried couples should seek the guidance of attorneys and other advisors to build a successful strategy. An optimal approach will include the following steps.

• Consulting an attorney about a cohabitation agreement.
• Discussing disability and death — two difficult subjects — to understand each other’s expectations about healthcare and wealth transfer.
• Coordinating estate documents, asset ownership, beneficiary designations and tax planning so that all elements of the plan work together and reflect the couple's intentions.
• Considering the tax implications of asset transfers carefully in light of the fact that tax deductions available to married couples are not applicable to unmarried couples.
• Titling assets and modifying beneficiary designations to follow the provisions of each estate plan.
• Executing durable powers of attorney for healthcare and property

Planning becomes even more important when a couple owns a closely held business, significant investment assets, family trusts or real estate. In those situations, the absence of a coordinated plan can create unintended consequences for both partners and their families.

As family structures continue to evolve, estate and wealth plans must evolve as well. Thoughtful planning can help preserve financial independence, protect loved ones and ensure that assets are transferred according to a family's wishes rather than default provisions of state law.

1. Gokhale, Jagadeesh. Penn Wharton Budget Model. “Change in American Families: Favoring Cohabitation over Marriage.” February 18, 2025.