Cohabitation Agreements Protect Unmarried Couples

When unwedded bliss just isn’t enough . . .

Cohabitation agreements are growing in popularity. More and more, unmarried couples who live together and commingle assets and finances are entering into legally binding 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 always be drafted by an attorney, and it may be advisable for the parties to have separate legal counsel.

A cohabitation agreement addresses issues concerning joint properties, as well as separate properties, and a host of other financial obligations shared by unmarried persons. 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?

It is generally recommended that a couple enter into a written cohabitation before moving in together. 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.

When unwed couples separate and lawsuits ensue, cohabitation agreements that were not drafted by attorneys are frequently held to be invalid or unenforceable. 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. In some cases, a court may even give consideration to oral cohabitation agreements, but there is no guarantee that an oral contract will carry much weight in a final decision.

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. For instance, a court may see that one party was the sole breadwinner while the other party was solely responsible for maintaining the home, and this could be seen as the basis of an implied agreement, particularly in cases where such an arrangement was expected 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. Also, couples may want to limit joint accounts to funds earmarked for household expenses, and maintain separate individual accounts for personal expenses and investments. Finally, when one person makes a gift or loan of money to the other, he or she may want to write the word “gift” or “loan” on 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.

Before you move in, take a minute to reflect . . .

Married couples are automatically extended certain legal protections, rights, and benefits that cohabiting unmarried couples are not. 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.

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