Key Considerations for a Cohabitation Agreement

For some couples, marriage is not the end goal. Many adults are content with entering into long-term, monogamous relationships as an alternative to marriage. However, if you are living with a partner, have joint assets, and your lifestyle is dependent on joint incomes, then you should consider having a cohabitation agreement.

Creating a Cohabitation Agreement

A cohabitation agreement is a written contract between two unmarried persons. It is a very specific agreement used to set forth each person’s obligations, expectations, and responsibilities within the relationship. While it generally relates to financial matters with respect to real property, it can also address personal matters. To start the process, each partner should contact and hire his or her own separate attorney, since there is generally a conflict of interest for the same attorney to represent both partners.  

Key Things to Discuss

Bank Accounts - The partners should determine if they will have a joint bank account(s).  Each partner should be cognizant that any money deposited or withdrawn from a joint account is money that belongs to both partners. Therefore, anything purchased with these funds are joint assets. 

Real Estate

Real Estate Purchased by Only One Partner - If one partner moved into a home previously purchased by the other partner, the parties should discuss whether the non-purchasing partner will be put on the deed.  If the couple jointly pays off or significantly pays down the mortgage, but the non-purchasing partner’s name is not on any legal documentation, he or she will likely have no legal claim to the property. Alternatively (or additionally), partners should discuss how any money paid toward the mortgage by the non-purchasing partner will be treated in the event of a separation—if it is not in writing, all monies paid could be treated as a gift or even classified as “rent.”

Real Estate Purchased Jointly - Partners generally purchase real estate using joint funds. In the event of a separation, property law would govern. Accordingly, if both names are on the deed, both partners equally own the property. Since each partner would own the property, one option would be to sell it and divide the profits. The other option would be for one person to buy the other person’s share of the house. However, in the event of death, each partner should determine if he or she would be able to continue to pay the mortgage of the home.  If the answer is no, a key remedy to a potential financial difficulty would be to purchase life insurance policies, in which each partner is named as the  other’s primary beneficiary.  The policies should, at minimum, be equal to the cost of the mortgage on the shared property.  This allows for an element of security should one partner want to remain in the home in the event of death of the other partner. 

Personal Property

Personal Property Bought Prior to the Relationship or with Exclusive Funds - As a general matter, personal property bought prior to the relationship or with the sole funds of only one partner should remain the property of that partner—unless the parties determine otherwise in the agreement.

Personal Property Bought Jointly -  Partners purchase most major personal property throughout the course of the relationship. Therefore, the agreement should address the division of big-ticket personal property bought with joint funds, such as vehicles, furniture, electronics, art or jewelry.  It is not necessary to itemize everything that you own or may purchase in the future. Instead, a simpler solution would be to determine what “type” of items  you want to split between the two of you (for instance if you have two vehicles, each partner would take the one he or she prominently drives).  Next, the agreement should dictate that all remaining personal property be either appraised or sold with the profits spilt between the parties. 

Health Care Directive/Power of Attorney - The right to make medical decisions on behalf of a partner does not exist, nor is it guaranteed if there is no written directive. Additionally, those in a long-term relationship should discuss appointing their partner as his or her power of attorney, so that the partner can carry out the health directive with no issues.

Inheritance Rights - Non-blood and non-legal relatives have no inheritance rights in the event of death.  Partners should therefore draft a cohabitation agreement in conjunctive with creating or modifying a will or legal trust. Each partner’s will or legal trust is the only means in which he or she can legally bequeath any non-shared personal or real property.  

Financial Support - If one partner makes significantly more than the other partner and/or one partner does not work outside the home, the parties should discuss whether any form of “palimony” should be provided in the event of a separation.  However, unlike alimony, palimony is not a legal term and is only applicable if clearly and expressly laid out in a cohabitation agreement.   

Again, cohabitation agreements are very personal, and can include a multitude of different matters.  Determine what is most important to you and your partner, and move forward from there. 

If and when you and your partner enter into a cohabitation agreement, you will likely need an estate plan, as well.  In both cases, you will need an attorney.   Post a short summary of your legal needs at www.legalserviceslink.com, and let the perfect attorney come to you!  

Posted - 12/04/2015