Financial Considerations for Unmarried Couples

First Republic Investment Management
June 5, 2019

A growing number of Americans are choosing cohabitation over marriage, and the trend is particularly pronounced among older couples. According to the U.S. Census Bureau, the number of unmarried couples over age 50 more than doubled from 1.2 million in 2000 to 2.7 million in 2010.

Why are so many people choosing not to marry — or remarry, as it may be?

Today, the decision is less dictated by societal expectation than it was before; many Americans now base their decision to tie the knot at least partly on the financial implications of marriage, which can be significant. It is an especially large factor for older couples who have accumulated wealth and for whom raising kids together is no longer a prime concern. 

So what are the financial implications of marriage? Here are a number of implications worth knowing about:

Marriage bonus — or penalty

Spouses must file their income taxes as married filing jointly or married filing separately beginning in the year in which they were married. This may work for or against their total tax bill. For couples who have a significant difference in income — particularly when one spouse does not work — filing jointly may reduce their tax liability because of the much wider income tax brackets for married individuals. Conversely, couples with similar earnings may find their combined incomes push them into a higher bracket, creating a much greater tax bill than they would have filing separately.

Home sale exclusion rules

When selling a residence, a single taxpayer can exclude the first $250,000 of capital gain from tax. For married couples filing jointly, the first $500,000 of capital gain is excluded from taxation regardless of how much each spouse contributed to the property’s purchase. To qualify for the $500,000 exclusion, one spouse must have owned the home as a principal residence for at least two years before its sale. Additionally, both spouses must have occupied the home as a principal residence for two years prior and neither spouse can have excluded gain from the sale of another home during the same time period.

Social Security

Married couples have more options for collecting Social Security. A spouse may choose to take his or her own benefit or a spousal benefit. A spousal benefit allows a husband or wife to receive as much as 50 percent of the other spouse’s benefit, which can be particularly helpful to nonworking spouses or those with limited or lesser-wage work histories. Spousal benefits can be taken as early as age 62. Additionally, when one spouse dies, the surviving spouse can take the higher of the two income benefit amounts.

Qualified retirement plans

Spouses have more distribution options and protections than non-spouses in qualified retirement plans. For defined-benefit plans, federal law requires that a joint and survivor annuity — ensuring the surviving spouse receives no less than 50 percent of the amount of the annuity paid during the participant’s life — is the only payout option offered unless the plan participant and spouse provide written consent to another form of payment. Furthermore, in all qualified retirement plans, the plan participant’s spouse must sign a waiver before a non-spousal primary beneficiary can be named.

Unlimited marital deduction

The unlimited marital deduction allows spouses to give an unrestricted amount of assets to each other during life or at death without incurring estate or gift taxes. Unlike the $15,000 annual gift exclusion amount and the approximately $11.4 million lifetime exclusion amount (as of 2019, with the passage of the 2017 Tax Cuts and Jobs Act), there is no limitation on the frequency or amount of assets spouses can transfer to each other. This allows federal estate taxes to be deferred until the surviving spouse dies, provided assets are not left to non-spousal beneficiaries.


Since 2011, surviving spouses have had the ability to claim any or all of a deceased spouse’s unused exemption. This exemption amount can then be applied to his or her own estate tax liability. This “portability” of a spouse’s unused lifetime exemption may be a simple and effective way for a married couple to reduce estate taxes.


How much liability a spouse has for debts incurred during the marriage varies by state. In community-property states such as California, each spouse is fully responsible for all debts created during the marriage, regardless of who incurred them. In common-law states, the spouse who incurred the debt usually bears the liability alone unless the debt was for necessities of life, such as food and shelter. In other words, marrying someone with bad credit could be detrimental to the borrowing power of a partner with good credit. 

Medical expenses

Soaring health and long-term care costs have also made marriage less attractive to many older couples, since those types of debt are often considered the responsibility of both spouses. Being married might also compromise the eligibility of an ailing partner for Medicaid benefits if the healthy partner has adequate assets.

Loss of benefits

Remarriage can trigger the loss of certain benefits. If a surviving spouse who is eligible for Social Security benefits from a deceased spouse remarries before age 60, the spousal income benefit is forfeited. Alimony from a previous marriage and pension benefits may also be forfeited upon marriage. Some military benefits, including pension income, access to health benefits and base commissary privileges, may also be lost through remarriage.

Determining whether marriage is the right financial decision can be complex. Your First Republic wealth advisor can help you evaluate the impact getting married would have on your long-term financial security and goals.

The strategies mentioned in this article may have tax and legal consequences; therefore, you should consult your own attorneys and/or tax advisors to understand the consequences of any strategies mentioned in this document. This information is governed by our Terms and Conditions of Use.