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.

Many businesses are looking to layoffs as a method of finding debt relief, but research is showing that this knee-jerk reaction to the economy isn’t always a good option. Peter Cappelli, director of the Center for Human Resources at Wharton School, stated, “It’s hard to save money if the jobs will be refilled within a year or so.”

The reality is that it costs to lay people off. There are severance costs, and unemployment insurance, not to mention possible litigation costs. In the end, there’s also the cost for rehiring and retraining replacement employees once the business gets going again. Here are some ways to cut back before resorting to layoffs.

New SBA programs

The Small Business Association is creating easier ways of procuring traditional loans by decreasing fees, increasing guarantees and changing eligibility requirements. A new program also was unveiled called the American Recovery Capital Loan Program, or ARC for short. It offers struggling small businesses loans if they can prove they have been profitable in prior non-recessionary years.

The purpose of these loans is to allow businesses to find debt relief by paying it down substantially. It also can be put toward freeing up money for other day-to-day expenses like payroll. Jonathan Swain, spokesman for the SBA, stated, “We estimate that we’ll be able to make about 10,000 ARC loans across the country. Based on the interest and the inquiries that we’ve been getting over the last several weeks, we do expect that these are dollars that will get out the door in a relatively short period of time.”

Shared work programs

Another way to avoid layoffs is using a shared work program. These are programs that offer partial unemployment benefits to employees whose schedules have been diminished. The Department of Labor estimates that Shared Work programs have prevented more than 75,000 workers from completely losing their jobs. Chief economist for the Labor Department Alexandre Mas stated, “When employers have to cut back, it provides an option for them so that when you have workers who have specialized skills” you don’t lose that knowledge.”

Each state can design their own rules for Shared Work programs. For example, in New York an employee’s work schedule can be cut by 20 to 60 percent to qualify for the program. They can collect benefits for up to 53 weeks. Pam Thayer of New Buffalo Shirt Factory stated, “Our business is seasonal, and we found when we did a generalized layoff, when we were ready to go full-bore production again it was very difficult to get our employees back.” Instead of laying off people, the company opts for the Shared Work program. A shared work program can also help employers find seasonal debt relief, without completely losing their workforce.

Furlough

A furlough is another strategy to avoid layoffs. A furlough is when employees are asked to take a week or more of unpaid time off to avoid layoffs. It can end up saving thousands of dollars in pay, freeing up money for other expenses.

A furlough, however, must be done under strict legal guidelines. Employees need to be notified in writing well in advance. There are also very different rules for salaried and hourly employees in terms of how furloughs work, so employers should check with an attorney. Employers can also check with the Fair Labor Standards Act for more information.

Layoffs aren’t an easy answer

Although layoffs sound simple, in the end they are not as cost-effective as an employer might hope. Employers should try other options to find debt relief prior to resorting to layoffs. Government assistance, Shared Work programs and furloughs are all options to look at.