Cohabitation has become more prevalent in the United States today. People may choose to live together for a variety of reasons, such as testing compatibilities and establishing financial security before getting married, or the inability to legally marry due to reasons such as same-sex, interracial or interreligious relationships, or philosophical opposition to the institution of marriage. Whatever the reason may be, if you are an unmarried couple and are thinking about cohabiting with a partner, here are a few things to consider regarding ownership of your property before taking that step together:
- If you have not been together long and do not own much, you may not need to consider entering into a written agreement. However, as you live longer together, it may be beneficial to both of you to enter into a written contract making it clear how property will be owned especially when you both begin to accumulate more property. For example, if you buy a house together, it is a good idea to create a property agreement. If none is created, you might face an often costly battle if you break up and cannot agree on how to divide what you have acquired. You can start by deciding how property and assets are owned, and whether or not income and expenses will be shared. Some couples choose to keep all property owned completely separate, while others choose to share some or all of their property by transferring part ownership to each other. You can also specify how you will own property when you acquire it during your relationship, and how to share or divide income and expenses. You can keep separate bank and checking accounts, credit cards, and insurance, or you can agree to handle some or all of these things jointly. In your agreement, you may also want to decide in advance how property will be divided in the event you separate, and also agree on a process to resolve any property disputes that may arise if you split up.
- If you are considering buying a house together, there are financial commitments involved. If the house is not owned equally, you can decide whether a person who owns less than half could get an increased share, for example, by making a larger contribution to the mortgage payment or by fixing the house. On the deed of the house, you can choose title to be listed as “joint tenants with rights of survivorship,” meaning that when one of you dies, the other automatically inherits the whole house. Another option is “tenants in common,” meaning that, when one of you dies, that person’s share of the house goes to whoever is named in a will or trust, or goes to blood relatives if the deceased partner left no estate plan. You should think about what happens in the event you split up — whether one of you will have the first right to stay in the house (for example, to care for a young child) and buy the other out, or if the house will be sold and the proceeds divided. If you decide on a buyout right, you should decide how the house will be appraised and how long the buyout process will take. Typically, couples may decide to have their realtor appraise the house and then give the buying partner one to five years to pay off the other.
- You may have heard of the term “palimony” thrown around to describe the division of property or alimony-like support paid to one partner in an unmarried couple by the other after a breakup, but this is not a legal term. Members of unmarried couples are not legally entitled to such payments unless they have made an agreement about it. To avoid a battle over palimony, you should create a written agreement that addresses whether or not one partner will make payments to the other in case of a break up.
- In terms of debts of your partner, you should not be liable unless you have specifically undertaken responsibility to pay a particular debt; for example, if you cosigned a promissory note or the debt is charged to a joint account. The one exception for unmarried couples applies if you have registered as domestic partners in a location where the domestic partner law states that you agree to pay for each other’s basic living expenses such as food, shelter, and clothing.
- In the event one of you dies, the surviving partner does not inherit the deceased partner’s property, unless the deceased partner made a will or used another estate planning device, such as a living trust or joint tenancy agreement. In a few states, same-sex partners who are registered as domestic partners or have entered into a civil union relationship may automatically inherit a portion of a deceased partner’s property, but these laws are not the best or easiest way to plan for inheritance. In order to protect the person you live with, you should specifically leave property using a will, living trust, or other legal document.
If the idea of bringing up a written contract seems uncomfortable, you are not alone. However, discussing these issues with your partner can stimulate important conversations about how you define and protect your relationship. Bringing up the subject can be a great way to learn more about your expectations in terms of your lifestyle, role and financial responsibility and may create a mutually fulfilling partnership.
NOTE: The information contained in this article is intended to provide general information and does not constitute legal advice. The content is not guaranteed to be correct, complete, or up-to-date. This article is not intended to create an attorney-client relationship between you and the author, and you should not act or rely on any information in this article without seeking the advice of an attorney.