274 | Skipping “I Do”: How to Safeguard Your Finances as an Unmarried Couple with Melanie Lockert

Hilary Hendershott: Welcome back, Money Lover. Today we’re embarking upon the second interview in a two-part series. In case you missed it, last week I interviewed Kara Foster and Lydia Hsu. They’re partners at Foster Hsu, LLP, a family law firm in San Jose, California, about the ins and outs of both prenup and postnup agreements.

Hilary Hendershott: And then today we’re going to talk about, in a similar vein, avoiding a very potentially expensive mistake, and that would be not protecting your wealth when you’re in an unmarried, romantic partnership.

Hilary Hendershott: Listen, I’m not here to comment on whether you legally get married. It’s fine to eschew tradition in your relationship, but I am here to say it’s not okay to eschew boundaries and responsibility in protecting your wealth if you decide to do that.

Hilary Hendershott: So today I have Melanie Lockert here to have that conversation with me. Melanie has a decade of experience as a writer in the personal finance space. She’s the founder of the blog and author of the book, Dear Debt. They’re both called the same. And that’s where she writes about having paid off $81,000 in student loans.

Hilary Hendershott: She previously hosted the podcast The Mental Health and Wealth Show, and she co-founded the Lola Retreat, a money event for women. She also produced my live event, about six years ago.

Hilary Hendershott: It was Melanie’s article for Salon.com titled, “Saying, I don’t? How unmarried partners can protect their finances” that caught my attention, and I’m excited to have her here today to expand upon that and get even more detailed about the why and how of protecting your finances when you’re choosing not to get married. Let’s dive in.

[INTERVIEW]

Hilary Hendershott: Melanie Lockert. Welcome to Love, your Money®.

Melanie Lockert: Thank you so much for having me. I’m super excited to be here.

Hilary Hendershott: Yes, we keep dancing around each other in the financial circles, and I love your writing. How did you get interested in this particular topic?

Melanie Lockert: Well, this is a topic that’s very close to my heart, actually. So I am 40 years old, and I’ve actually never been married. But I’ve been in two long-term partnerships, the first one of nine years, and the second one that I’m in, currently, of five years. Marriage has never been something that has really appealed to me; just getting the government involved…

Melanie Lockert: Something that I’m not really particularly interested in. I’m not saying that I’ll never do it. I’m kind of on the line for certain different reasons, but I am curious, if people do not wish to get married, how can they protect themselves as if they were married? If that’s something they do not want to do.

Melanie Lockert: And also, on the other side, there are people who cannot afford to get married because of disability benefits.

Melanie Lockert: I know I have an uncle of mine who is no longer alive, but when he was alive he was with his partner for 20 years, and they were not legally married because of disability benefits. It would have affected how she received benefits.

Melanie Lockert: And towards the end of her life, there were some contentious points about how she was supposed to be taken care of. There was a fight between him and her family. It was a whole entire mess, and it really just illuminated how vulnerable unmarried partnerships are.

Melanie Lockert: And I personally believe that unmarried partnerships are going to become more popular as people either, you know, don’t want to get married again if they’ve already been divorced. They don’t even want the potential of a divorce in the first place, or they’re just not interested. I think there’s many different reasons that people might not want to get legally married. But if they want to be, quote, married in their heart, or married in their minds, or even in the eyes of the government, how–

Hilary Hendershott: Married at Burning Man.

Melanie Lockert: Yeah, how can they try to be as legally taken care of as possible? And this is very important to consider, because when you are legally married, there are certain benefits that just kind of happen, you know, for the spouse and kind of presumptions are made, but not necessarily if you’re just a partner, right? Like you don’t want them, in the eyes of the government, to just be seen as your roommate, or something, right?

Hilary Hendershott: Right. Well, and one of those benefits as it regards your uncle is, of course, and people are accustomed to this–you see it in all the medical shows–is the husband or wife gets to speak and make medical decisions for their partner, and we would assume, after 20 years, he would have had the same privilege, but because they didn’t pre contract for it or get a health directive, probably I would imagine his family got to step in and make decisions.

Melanie Lockert: That is what happened, and it was very painful for him. And you know, I think he just felt like, wow, we’ve been in this relationship for 20 years, and I have no power. And that was something that stuck with me for a long time, seeing as I’m not necessarily, you know, super interested in marriage.

Melanie Lockert: And I thought, what are the ways that people need to protect themselves? How can we get this information to more people? I am lucky enough to write for Salon.com, which is an amazing website, and I pitched this article, my editor accepted it. I’ve gotten a lot of great feedback on it. And I think it’s important information that everyone needs to know. And it’s typically that kind of information that you go after, like after something bad happens. But obviously you want to try to take care of that beforehand, so that everything’s smoother once something does, you know, happen.

Hilary Hendershott: That’s the really big thing that people don’t realize that the legal marriage contract does is, it is a contract. It doesn’t just marry you, which is some amorphous, long-term relationship thing. It also talks about how you’ll dispose of real estate, how potential health decisions can get made, who would inherit money if someone dies suddenly, right? And so it’s all these things that I think people don’t think through.

Hilary Hendershott: Did you find in your research that both same-sex and opposite sex couples are living together; cohabitating without marriage more and more these days?

Melanie Lockert: I did find that. So the census data that I found, you know, had more data on heterosexual couples. But I’m pretty sure, from what I found, it was also same sex couples as well. It just, you know, from their data, it was a higher percentage of heterosexual couples. But I think in both, for sure, it’s becoming more popular.

Hilary Hendershott: I think anecdotally, it just seems that way to me. People talk about it more. I mean, I remember the first time I heard a couple planning to have a baby before they got married, and it blew my mind, and I don’t even think twice about it anymore, you know.

Melanie Lockert: I know so many people who have children together that aren’t legally married, and I don’t know if they’re planning to get married or they will. It’s not my business. But yeah, it’s definitely the case now. There’s not necessarily this like, you meet, you move in together, you get married, you have a baby. All of the timelines; the milestones are kind of whatever you want these days, for better or worse. Right?

Hilary Hendershott: I know. The timelines have all been thrown to the wolves. There is no right way to do things anymore these days. What do you think are some of the factors impacting this decision for people?

Melanie Lockert: Well, I can talk about myself personally, and then kind of what I know from other people who have made similar decisions.

Melanie Lockert: I guess I’m the type of person that I am scared to get into things that I cannot easily get out of. It’s why I haven’t pursued home ownership. It’s why I don’t have children. It’s why I haven’t been married. I like the flexibility and freedom that if something is going wrong, that I can leave, that I can take care of myself quickly. That freedom means so much to me.

Melanie Lockert: I’ve also seen women in my family, in different generations, who have suffered greatly while married.

Melanie Lockert: And I think, you know part of that is like, if you don’t have a healthy model of what a healthy marriage looks like, why would I want that? You know?

Melanie Lockert: Secondarily, we all know how costly divorce is, and then now, women are more and more becoming the breadwinners. I’ve heard of women paying alimony to men. There’s community property states. There’s so many different things that you have to prepare for which prenups can really help with obviously, and I think everyone should have a prenup to try to protect themselves if they are going that route. But, I think a lot of people still feel that prenups are a bad word, or they’re nasty. And then…

Hilary Hendershott: They do.

Melanie Lockert: It’s such a financial risk.

Hilary Hendershott: What’s the word? Gold digger.

Melanie Lockert: You’re a gold digger, or you’re just preparing for divorce already. It’s like, well, isn’t the divorce rate close to 50%? I mean, wouldn’t you want to protect yourself? I mean, it doesn’t make any sense to me. But for me, I think it’s a huge risk. I think that it’s something that you can’t easily get out of. I’ve seen for both women and men that it can be very nasty, very expensive.

Melanie Lockert: You know, when my nine-year partnership ended, oh, my God, I was a disaster for close to two years, and that was without the legal paperwork. I mean, I still had to do things like, oh, he needs to get off the Internet bill. He needs to get off the lease, and he needs to move out when I’m not here, and you know, I’m taking the kitties and all that kind of stuff. It’s a mess, right, but like…

Melanie Lockert: That was without having to go to court, and you know, getting all this paper, and I was like, Oh, my God! I could barely function as a human being. I can’t imagine people having to deal with all of the additional paperwork and cost on top of that. And I don’t have the data currently–but I feel like I have seen data–especially for older women, divorce tends to be financially–they tend to be financially worse off afterwards, right?

Melanie Lockert: And so I think women need to protect themselves. From other people that I’ve heard who do not want to get married, they just don’t want the government in their relationship. They don’t think that having this certificate, this contractual agreement, is necessarily something to aspire to.

Melanie Lockert: I know that some kind of like hardcore feminists are like, “Oh, marriage used to be like the women is the man’s property like, why would I want to be part of this institution?” So I think some…

Hilary Hendershott: I haven’t heard that one for a while, but I’ve heard that one. Yes.

Melanie Lockert: Yeah, some people think it’s kind of archaic.

Melanie Lockert: I mean, you’ve seen a lot of different couples now call each other partner. I call my partner my partner, because he’s not my boyfriend, but he’s not my husband. He’s my partner.

Melanie Lockert: And I think, unfortunately for people who are gay, we’ve kind of co-opted that term, and I feel bad because I know that used to be their term. But now heterosexual people have also co-opted the partner term.

Hilary Hendershott: I know, and there’s also business partner. And so a bell rings in my ears every time I hear that word like, wait, are you? What kind of partner?

Melanie Lockert: Romantic or business? Can you clarify? Absolutely.

Hilary Hendershott: I agree, this sort of nontraditional approach to life is more and more popular. That’s how it seems to me. And so people get very excited about their relationship. Obviously, new romance is inspiring. It can take you over, right? And they get really excited about starting a life together. And for most that involves a decision about becoming parents, but definitely cohabitating. And then some people, of course, decide to buy real estate together.

Hilary Hendershott: So what, in your research, did you find are some of the things that people don’t think through? In other words, what comes up that’s a surprise? You learned this the hard way in your first separation.

Melanie Lockert: Yeah, I think people don’t think through where people are going to live afterwards, like, who’s going to take care of the place? Who’s going to take care of the pets? How are you going to untangle your financial accounts? I think that’s very important, especially if you have a mortgage. I know in the Salon article I quote an expert who talks about kind of the rights, like if you are an unmarried partner with a mortgage, that can get incredibly messy. So you have to kind of have a breakup plan if you have a mortgage with another person in the event that you break up, right?

Melanie Lockert: And then also, you have to think of all sides, because I’m part of some of these financial women’s Facebook groups. And I see so many like, “I’m in the process of breaking up or divorcing. Neither of us can afford to buy each other out. We don’t want to sell the house. What are we going to do?”

Melanie Lockert: And it’s like, yeah, you have to consider, what if you can’t buy each other out? Or what if you don’t want to sell, but you can’t afford it? You have to consider all of the options, and what could happen? And sometimes, we have to make crappy choices in an already difficult time. Right? And definitely taking off that person as a beneficiary on your accounts once you guys break up.

Melanie Lockert: I took my ex off of all of my accounts. I was like, “No, if I die he does not need that money anymore.” So make sure to update your beneficiaries for your checking, savings, retirement accounts.

Melanie Lockert: Conversely, if you are in an unmarried partnership, and you guys are still happily together, that’s one of the easiest things that you can do is to just add a beneficiary to your account, so that if something happens to you that your money can go to your partner.

Hilary Hendershott: And I actually saw that called out in your article. I very rarely see people talk about the POD/TOD election, and we actually have– a solid 35% of our financial planning clients have one of those elections on a bank account. It just absolutely is the easiest way to go. So POD is Pay on Death, and TOD is Transfer on Death. What did you learn about those?

Melanie Lockert: Yeah. So I think pay on death is maybe the bank one…

Hilary Hendershott: I think they actually mean the same thing. But maybe states use different acronyms.

Melanie Lockert: Yeah, from what I learned, the bank account typically is payable on death. And investment accounts are transfer on death. So I think they basically mean the same thing. I think it’s just dependent on the account, potentially varied by state or institution. But yeah, it’s just an election saying that you know, if I die, transfer on death/payable on death, this amount goes to this beneficiary; it can go straight to that person without all of the hassle. And I mean, I think that’s one of the easiest, nicest ways to help your loved one in their grief if something happens to you.

Hilary Hendershott: It really is. It really is, and it’s really easy. You know, I’ve got advisors working for me who used to work for the retail banks. The TOD/POD election is very straightforward. If you get a death certificate, the money is yours. And the key thing to note there is that it avoids probate, which.

Melanie Lockert: Yes, huge.

Hilary Hendershott: Probate is a terrible thing.

Melanie Lockert: Huge. You don’t want that.

Hilary Hendershott: No, no, not if you can avoid it. Here’s a quote from an attorney in your piece, and we’ve already sort of touched on this topic of the health directives. But I really like this quote, “Marriage gives spouses the benefit of many legal presumptions and protections, with regards to each other’s property and affairs. An unmarried partner, on the other hand, is at much worse position than even an estranged child, or a sibling in a situation where the other partner has died or become incapacitated.”

Hilary Hendershott: Is there anything you would add to that? Or if your friend said to you, can you explain this to me like I’m a 5th grader. How would you put that in simple terms?

Melanie Lockert: Yeah, I thought that quote was strong and amazing, of course, that’s why I chose to put it into the piece. But basically he’s saying that you know, these people that you have familial relationships with by blood, even if you are no longer in contact with them, could potentially have more rights than your unmarried partner, because there’s no paperwork, there’s no legal precedent for any rights. So that’s why this article is so important to me. So how can we try to regain rights if we don’t necessarily want to take that traditional path of marriage? Or if we do want to have more rights than an estranged sibling, right?

Hilary Hendershott: Right. And that comes to you through the Healthcare Directive. So typically, most attorneys are going to give you a will, a Healthcare Directive and a power of attorney. So you get to be the person’s caretaker in their health and their legal matters with those two documents; they typically come together.

Hilary Hendershott: And so I do want to ask you about– in my opinion, the huge elephant in the room is real estate.

Hilary Hendershott: And you even brought up a story of a woman, you know, or tangentially through a Facebook Group who’s suffering because they’re in this piece of real estate, they don’t know how to exit. They can’t afford to buy each other out, and there’s no way around it right? Two people cohabitating have a lower cost of living than two people living separately. Every roof has a sunk cost.

Hilary Hendershott: But before I do that, any other lessons that you learned in between relationship one and relationship two to protect your legal self; your health self; your bank account self; your spending? Are there ways you negotiate spending different with your current partner that didn’t work for you with the previous one?

Melanie Lockert: Yeah, well, definitely, I have more firm boundaries around my finances and their finances, and what we share and what we do not. I think the last relationship kind of got codependent in a sort of toxic way, and that’s partially what ended it.

Melanie Lockert: And you know, having kind of you are an adult, and you take care of yourself. I’m an adult, and I take care of myself. Here’s where we come together as partners. Here’s our plan for the future. Here’s how we manage shared expenses. You know, we have a shared credit card that we have together, and the groceries go on that utilities go on that. And then the rest is our personal stuff. So I think I have better boundaries. I have better systems.

Melanie Lockert: I have better communication skills. And I also have a better idea of what I will put up with and what I will not, and also kind of what makes sense for the future.

Melanie Lockert: I mean, I got into that other relationship when I was 23, and so, relatively young. I was in that relationship from 23 to 32. So you change so much in that time.

Melanie Lockert: And the expiration date had, you know, arrived. I feel like now I’m more mature, I know what I want. I know how to protect my money and their money. And then, yeah, writing this article is like, okay, if we are going to be unmarried partners but we want to be together for a lifetime, how can we prepare our finances so that you have rights, I have rights? He’s already on my accounts as my beneficiaries. So, yeah, I think that’s super important.

Hilary Hendershott: So what would you say to an unmarried couple planning to buy real estate together? What would be your top of line advice?

Melanie Lockert: I would say that you have to figure out how you guys are going to pay the mortgage, number one. Is it going to be based on your income? A lot of couples think 50/50 is like the best way to go, but not necessarily. If someone’s making 40,000 and someone’s making 100,000, you know, maybe you guys want to do a percentage split of who pays the mortgage? I think, also, who is on the deed? Make sure both of you guys are on the deed.

Melanie Lockert: But then, also, if you’re unmarried, what would that look like if you guys break up? And I know that’s a very uncomfortable conversation to have. No one wants to have it, especially when you are happy, and you are going through a wonderful moment like, we’re about to buy a house! But it’s so much easier to think when you’re in a cool head about what you might do at that time.

Melanie Lockert: Should I move out? Should you move out? Would we each have the resources to even buy each other out? Or would we have to sell and continue to live together for an undetermined amount of time until we find something else, right? So I think it’s important for people to go through that mental exercise. And of course, that’s just a mental exercise. The way we react and do things in a trying moment can be completely different.

Melanie Lockert: And it can be, you know, weirder and more difficult than we can imagine, but I think, at least mentally preparing for that possibility, and having a plan can make all the difference.

Hilary Hendershott: Well, and I’ve definitely been the Debbie Downer at the party when a couple announced that they had just bought real estate together, and I knew that they weren’t married–like their wedding’s in two years, or whatever, which is different. I mean, I’m now actually thinking about a specific couple. But you know, I got accused of being macabre, because I said, “Oh, wow! That’s a really big deal. I hope nothing bad happens to either of you, like somebody’s gonna get screwed.”

Hilary Hendershott: And sure, in retrospect, not my business to comment on. In the moment, it just came out of my mouth. I’m better at that now. But I think the thing that people don’t really grapple with is that no relationship lasts forever. You’re either gonna break up or someone’s gonna die.

Melanie Lockert: One of them, yeah.

Hilary Hendershott: And that’s how it goes.

Melanie Lockert: Death or divorce.

Hilary Hendershott: Right.

Melanie Lockert: I mean, yeah.

Hilary Hendershott: And so you know, you think about things, and you talked about titling in your account. So the difference between joint tenants and joint tenants with right of survivorship. I don’t know if I’m putting you on the spot. Do you remember the details of the difference?

Melanie Lockert: I think the joint right of survivorship is the one that helps you go straight to the other person, correct?

Hilary Hendershott: Yeah.

Melanie Lockert: That was the interview with the expert, so.

Hilary Hendershott: So if you take title as joint tenants, which is a recommendation–the escrow officer is going to make a recommendation on the day of the purchase, and that person isn’t necessarily trained to do what Melanie wants to do for you in this article, what I want to do for you in this podcast–and they might say, take title as joint tenants. And what you might not realize is, if something happens to your partner, he or she could leave his half of the property to his mother, his brother, his child.

Hilary Hendershott: Right? And now you co-own a piece of property with your former lovers’ relative, or whatever. And the two of you would either have to come to an agreement about how bills get paid or then you have to come to agreement about how to sell the property. That is not what you need at a moment like that in your life.

Hilary Hendershott: All right. I have one question. If you have a piece of advice on–what if, let’s say someone already owns the property.

Hilary Hendershott: Like, the female already owns the property. We’re in an opposite sex relationship. The couple, they’re not going to get married. The male partner is going to move in. Do you have any recommendations on how to think through not only the paying of bills, but, of course the other financial aspects of that situation, given she’s paying a mortgage, and she’s probably getting a tax deduction for paying the mortgage. Plus, there’s the equity growth in her property, and then there’s the rent he’s no longer paying. That was a lot of details. Did you talk to anyone about a situation like this? I mean, this isn’t that uncommon.

Melanie Lockert: Yeah, actually, I have not talked to anyone about that. And that’s interesting, that was actually the exact situation of me and my partner when I moved in with him. He had a condo that he was paying, you know his mortgage, and I paid rent. And yeah, I thought about that. Like, should I be entitled to part of the equity when he sold? Which, he did sell when we moved to New York.

Melanie Lockert: And you know that’s not something we discussed or had any kind of plan for, and so I don’t have an answer. But I definitely did think about it. And we weren’t at that place for that long, either. But I think definitely like, if you are paying a significant part of the mortgage over decades, right?

Melanie Lockert: Probably a discussion should be had about, you know, am I entitled to a part of the equity if or when we sell? Or when we break up? Or, you know, can I be the person that has this if you pass away? You know what are those scenarios, right?

Melanie Lockert: And I think all of these things that we’re talking about–whether it’s breaking up, death, or divorce–all of those situations are traumatic on their own. They’re extremely difficult to go through. This is all to make it a little bit, tiny bit easier for you, because it’s already going to be so hard, right?

Hilary Hendershott: Right. Yeah, at least we at least we don’t have to worry about the money. Yes, thank you so much. I’ve just really appreciated this conversation, and loved the article. Is there anything I missed? Did we omit anything from this lively conversation?

Melanie Lockert: No, I think this is great. Yeah, I think it’s just important for people to think about all situations, you know, while you’re happy; what could potentially happen if you break up; what could happen when you die? And I don’t think that’s being negative. I think that’s being prepared. And I think if you kind of shift that idea to this is me loving myself and taking care of myself and my future self. Because at the end of the day, we are alone in the sense that yes, at the end of our lives people are going to die, or, you know, divorce, or break up and how can I protect myself and be there for myself, no matter what happens?

Hilary Hendershott: One question that came into my mind as you were saying that. And I love the reframe.

Hilary Hendershott: And yes, for everyone listening–let’s get out of this mindset that even discussing or putting boundaries around your money is bad, or selfish, or greedy or unfeminine, for those of you females listening. Did you and your current partner put anything in writing? Did you document any of your other plans just between the two of you?

Melanie Lockert: Not yet. But after this article, I definitely have a checklist of things that I wanted to do. Like I said, part of the reason of me pitching this was I knew certain things I needed to do. But then I was like, let me interview these professionals, and then now I have a checklist. So, I still need to do my homework also.

Hilary Hendershott: They thought it was for an article on Salon.com. But really it was for you.

Melanie Lockert: You know, both, both.

Hilary Hendershott: Very good. Okay. Well, to that end, Melanie, if your money were writing you a love note, what would it be thanking you or complimenting you for?

Melanie Lockert: My money would definitely be thanking me for all of the adventures that we have gone on and travels. I think that is the absolute best way to spend and use money, and it’s given me such a great return on investment for my mental health, being able to speak another language. I speak Spanish and just having fun enjoying new cultures. So I think that is definitely what my money would say.

Hilary Hendershott: I love it. What was your last, best adventure?

Melanie Lockert: The last best adventure, so we spent our 5-year anniversary in Paris. And then right before that was my partner’s birthday, and we were in London. So it was a really great combo, London for his birthday, Paris for our 5-year anniversary.

Hilary Hendershott: The two best cities.

Melanie Lockert: Yeah, that was in September. And actually, I went to Guatemala in November for their Day of the Dead/All Saints Day festival. They have this big, giant kite festival that’s super amazing. So I did that as well, and that was just mind blowing.

Hilary Hendershott: Inspiring. Thanks for being here.

Melanie Lockert: Yeah, thank you so much.