1/29 | Unmarried Couples can be protected by Cohabitation Agreements
When unwedded bliss just isn’t enough . . .
Cohabitation agreements are growing in popularity. Unmarried couples that live together combine assets and finances and are entering into legal agreements to protect both parties. Understanding what cohabitation agreements are can provide valuable financial insights for all unmarried couples who live together.
What is a cohabitation agreement?
A cohabitation agreement legally defines the specific rights, obligations, and protections provided to individuals who live together without being legally wed. The agreement should be drafted by an attorney, and it is advisable for both parties to retain counsel.
A cohabitation agreements defines and addresses joint properties, separate properties, and other financial obligations shared by unmarried people. It can also address the parties’ expectations about who will pay for what during the time of cohabitation.
When should an agreement be drafted and why is an attorney necessary?
Couples considering moving in together are recommended to enter into a written cohabitation prior to the move. Committing an agreement to writing before cohabiting allows couples to clearly identify their financial boundaries, expectations, and future plans for wealth creation. Although anyone can draft any kind of an agreement for him or herself without legal assistance,it is not recommended that couples draft cohabitation agreements themselves.
If unwed couples separate and lawsuits begin, cohabitation agreements not drafted by attorneys are frequently unenforceable or invalid. Often this is because the agreements were so poorly drafted or were drafted in such a way that one or both parties may claim to have been treated unfairly.
How do courts view cohabitation agreements?
Historically, courts have viewed professionally drafted cohabitation agreements quite positively. A court may use discretion to oral cohabitation agreements, but oral contracts may not carry much legal weight, if any.
Some state courts have evaluated the financial track-record of a relationship to discern a pattern of financial dealing, which is then considered an implied agreement. A court may see one party having been sole breadwinner while the other maintained the home, thus making an implied agreement, especially if the agreement was meant to continue.
Some common-sense advice
Although cohabitation agreements can go a long way to protecting both parties in an unmarried relationship, there are a few common-sense strategies that couples should consider before moving in together, such as maintaining individual credit cards in order to establish or maintain separate credit profiles. Couples might want to restrict joint accounts to funds solely for household expenses, and keep separate individual accounts for expenses and investments. Ultimately, when someone makes a gift or loan of money to the other, they may want to write “gift” or “loan” on the check evidencing the transfer. Doing so will help to keep track of why money was transferred between the parties should motives or intentions later be called into question.
Take time to reflect before moving in together . . .
Married couples have legal protections automatically, rights and benefits that cohabiting unmarried couples do not enjoy. Therefore, discussing financial matters with an attorney before moving in together is strongly advised for the financial protection of couples who do not wish to legally wed. Cohabitation agreements are a worthwhile tool to help unmarried couples clearly identify their financial expectations, goals, and plans for the future.