Living Together And Property Agreements

A contract is no more than an agreement to do (or not to do) something. Marriage is a contractual relationship, even though the “terms” of the contract are rarely stated explicitly, or even known by the marrying couple. Saying “I do” commits a couple to a well-established set of state laws and rules governing, among other things, the couple’s property rights should one spouse die or should the couple split up.

Unmarried couples, on the other hand, do not automatically agree to any state-imposed contractual agreement when they start a relationship. The couple may have a joint obligation to a landlord or to a mortgage company if they rent or buy a place together, but that obligation is no different than if they were roommates. Living together, in and of itself, does not create a contractual relationship, nor does it entitle you to a property settlement (or inheritance) should you split up (or should one of you die).

A typical unmarried couple buys property, mixes assets, and invests together, often without writing down how they intend to share the property if they split up. Then, if problems about money and property come up, they usually try to reach an understanding or a compromise. If they split up, they quietly divide their possessions and go their separate ways, and they are not required to follow the legal rules that apply to marriage and divorce. But some couples’ relationships don’t end so well. They don’t quietly divide the property and move on, but instead bring their battle to court. Courts in most states have responded to these claims by trying to figure out what the couple had agreed to during the relationship and dividing their property accordingly. In doing so, courts have ruled that unmarried couples generally have the right to create whatever kind of living together contracts they want relating to financial and property concerns.

As a result, if an unmarried couple chooses to make an agreement together, or in some states if they act as though an agreement exists, that agreement will often be considered an enforceable contract—a “non-marital agreement” in legal terms, or what we call a living together contract or agreement. Among other things, an agreement can help avoid problems when you commingle money and property; make clear what your intentions and expectations are regarding property ownership, caring for children, and covering household expenses; and ease the division of property during a breakup.

What to Include in a Living Together Contract

A living together contract can be comprehensive, covering every aspect of your relationship, or it can be specific, covering only one transaction (such as a new house purchase). Your contract should say exactly what you both want, and how much sharing (if any) you want to do of property and finances. Here are the issues that couples most often include in a living together contract:
• property and finances, including the property you had before you began the relationship, as well as the property either or both of you accumulate during it
• property inherited or received by gift during the relationship
• property bought during the relationship
• expenses, such as food, utilities, and housing
• what will happen to your property if you split up or if one of you dies, and
• a method for resolving any disagreements that later arise out of your living together contract, such as mediation.

Living together agreements do not usually cover personal aspects of your relationship, such as who does the cooking, feeds the dog, or cleans the house. In fact, agreements on nonmonetary issues are unlikely to be enforced in court.

Who Needs a Living Together Contract?

Sometimes living together contracts are made to protect each partner in case the relationship ends. But more often, couples enter into them to communicate their needs and expectations, define their rights, and enhance one or both partners’ peace of mind at either the start of the relationship or when the couple makes a major purchase. Creating a well-crafted agreement not only helps you figure out how you really want to own your property, but also serves as a useful reminder if misunderstandings develop later or one of you dies without a will. Another important benefit of a living together agreement is that if one partner is supporting the other, or if one partner has given up a career in order to take care of the home or raise children, the agreement will protect the dependent partner by ensuring that issues of support and compensation are stated in writing. Otherwise, the dependent partner can be left with nothing after having given up a lot.

Obviously, you don’t need a contract if you are in a brief relationship. But in a long-term and serious partnership, whether you’re basking in the glow of having just “joined forces” or you’ve been together 20 years, you should consider the legal consequences of dealing with money and property. If you are planning to mix assets or share expenses, you should most definitely put your agreement in writing, especially if a significant amount of money is involved. If you’re both stone-broke, with no property and little prospect of getting any soon, you can still benefit by deciding how you will handle money and property if it ever arrives. Also, you can put more emphasis on the practical issues of day-to-day living together, such as how expenses will be paid.

Even though some courts will enforce an oral agreement or even an implied one a written agreement is essential, though it’s surely no substitute for trust and communication. A contract won’t enable an unmarried couple to continue loving one another or prevent them from splitting up; but if times get hard, a written agreement can do wonders to reduce paranoia and confusion and help people deal with one another fairly. There are no national statistics on how many unmarried, cohabiting couples enter into living together contracts, but some lawyers say such contracts are on the rise as a result of more couples living together and new legal rulings that support the validity of living together agreements.

Legal Rules Governing Living Together Contracts

For the most part, courts and judges not legislatures have made the legal rules governing living together contracts. First, the court ruled that marital property laws do not apply to couples who are not legally married. Then, the court recognized that unmarried couples are here to stay. Finally, the court declared four contract principles:
• Unmarried couples may make written contracts.
• Unmarried couples may make oral contracts.
• If a couple hasn’t made a written or oral contract, the court may examine the couple’s actions to decide whether an “implied” contract exists.
• If a judge can’t find an implied contract, she may presume that “the parties intend to deal fairly with each other” and find one partner indebted to the other by invoking well-established legal doctrines of equity and fairness.

Why You Need to Put Your Living Together Agreement in Writing

You can avoid a host of legal problems by putting your living together agreement in writing. A written contract covering who owns what is the only way to protect yourself and honor your collective intentions whether you want to keep all your property separate or share some or all of it. Without some type of written agreement, you may face serious and potentially expensive battles if you separate and can’t agree on how to divide what you have acquired. Putting your contract in writing needn’t be time-consuming or dreary (and it’s certainly better than having a judge write one for you as part of an expensive court fight). Approach the task in the spirit of clarifying your understanding and preserving the shared memory of two fair-minded people.

Sometimes one or both partners can be reluctant to sign a contract, believing it demonstrates a lack of trust in the other partner’s word. To the contrary, it’s a healthy dose of realism, recognizing that over time memories fade and feelings change, and a written contract can make you feel secure that your intentions at the time you made it won’t be forgotten. Without a written contract, it is almost impossible to enforce a claim of an oral contract in court. If your partner isn’t willing to sign an agreement, don’t rely on the oral promise—it’s best to consider yourself to be without a contract at all.

Cohabitation Agreements

Unmarried couples who are living together have the option of creating a number of legal documents (often called “cohabitation agreements”) that can help protect their rights as a couple, while at the same time safeguarding their individual interests and assets. Since unmarried couples who live together may one day split up, especially outside of the legal bonds and social institution of marriage, it makes sense to plan ahead in order to avoid future conflicts. This sub-section includes information about when you might need a cohabitation agreement, what it can do for you, the different ways they can be drafted, and related matters such as wills and durable power of attorney.

Legality of Cohabitation Agreements

Unmarried couples have not always had the option to enter into contracts to provide some of the protections of marriage without actually getting married. After some litigation on the matter it has become fairly well established that there are three legal bases by which non-marital agreements can be established.

• Unmarried couples can enter into both written and oral contracts covering rights normally associated with marriage, such as the rights to property acquired during the relationship.
• Unmarried couples can create “implied” nonmarital agreements even without discussion or any writing. In appropriate situations the court evaluates the couple’s actions to determine whether an agreement was implied.
• If there is no implied agreement the court can determine that the couple intended to “deal fairly with one another,” and thereby grant parties rights and obligations consistent with equity and fairness.
A cohabitation agreement is more flexible and less regulated than a marital agreement. Couples typically include the following key points in their contracts:
• Distribution of property in case of death or breakup;
• Financial support during the relationship or after;
• Payment of debts from before and during the relationship;
• Division of the principal residence upon death of one partners or breakup;
• Creation of a joint tenants with rights of survivorship, allowing the other partner to own the shared home if the other dies or adding both partners’ names to the deed;
• Decide on support, custody, or visitation rights for minor children, although the court can disagree with this and decide differently based on what’s in the best interests of the children;
• Determination of health care insurance responsibility; and
• Creation of advanced health care directives or health power of attorneys to allow both partners to make decisions about the other’s health care in case of incapacity

Cohabitation Agreements vs. Prenuptial Agreements

Premarital and cohabitation agreements are apples and oranges. If you marry your partner when you previously had a cohabitation agreement, it will not be in effect after the marriage. In contrast, the whole purpose of the prenup is to determine what happens after marriage, in case the couple divorces. All states enforce at least some prenups and almost all states recognize cohabitation agreements.

Subject Matter of Cohabitation Agreements

The legal requirements for a valid cohabitation contract are much like the requirements for any valid contract. A valid agreement will be comprehensive to avoid dispute relating to an aspect of the couple’s life together unaddressed by the contract. Some of the aspects of the couple’s life together a cohabitation agreement might cover include:
• The distribution of property in case of death or breakup.
• Financial support during or after the relationship.
• The division of the principal residence upon death or breakup.
• The creation of a joint tenancy with right so survivorship, or adding a partner’s name to a deed.
• Support, custody, or visitation rights for minor children, though this is easily rejected or modified by a court, which can decide differently based upon the best interests of the child.
• Determination of health care insurance responsibility.
• The creation of advanced health care directives or health power of attorneys to allow partners to make decisions for each other in case of incapacity.

Wills and Durable Powers of Attorney

Two documents that may be used in place of, or in addition to, a cohabitation agreement are wills and durable powers of attorney. These documents, like a cohabitation agreement, can help ensure that the individual’s wishes are carried out in the event that they die or become incapacitated.

Wills direct how a person’s estate will be distributed after they die. This is important because an unmarried partner is usually not entitled to anything at all under the laws of intestate succession that control how property is inherited when someone dies without a will.

Durable powers of attorney allow someone to act and make decisions on your behalf if you become legally incompetent to manage your own affairs through illness or accident. Unmarried partners typically have no right to decide important health or financial matters in such situations without a power of attorney.

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It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!

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