Suze Orman
Photo: Marc Royce
Q: I'm in a same-sex relationship, and my girlfriend and I are trying to set up our legal situation to approximate marriage as closely as possible. We both own property; I'm going to sell my co-op and move into her townhouse. My attorney has advised me not to pay into a house in which I don't have any equity, and her attorney told her not to sell any of her equity. I can see why this is practical counsel, but I want us to be partners in every way. We've discussed selling both places and buying something together, but we would end up with much less for our money. Please help; we feel so torn.

Suze: Unfortunately, the fact that most states prohibit same-sex couples from marrying shuts you and your partner out from valuable financial breaks, such as a generous federal estate tax exemption as well as Social Security survivor benefits. But at least we can address your housing situation in a way that respects and protects you both—and this strategy applies to any couple, straight or gay, who wants to own a house together without saying “I do.”

Since you plan to move into your girlfriend's townhouse, she should sell you—not give you—a half share of the property. I'm not sure why her attorney would advise against that plan, because there is an easy way to protect her if things don't work out. Simply have the lawyer draft an agreement that lets her buy out your share if you break up. In effect, she gets paid fair market value for making you a co-owner but retains the right to keep the home down the line. That seems fair to me.

The key here is correctly setting up the title to the house, which determines what happens when one of you dies. If you own it as joint tenants with right of survivorship, the remaining partner takes over the deceased's share. This is what my personal estate lawyer refers to as “survivor takes all.” Should that make either of you uneasy at this point, there's another legal answer that lets you each designate your own heirs without forcing the surviving partner out. You can set up your own living revocable trusts in which you specify who gets your piece of the home. If you want to leave your portion to someone other than your partner, I also recommend having the lawyer draft a life estate on the house. With this document, the surviving co-owner is allowed to stay until she moves or dies. Once that happens, the inheritance plans laid out in your trusts kick in.

After becoming co-owners, you can divide up the mortgage payments, property taxes, homeowner's insurance, and other expenses. A final layer of protection would be to purchase term life insurance policies that would give one of you enough money to handle all the housing costs should the other die before the mortgage is paid off.