In the past, I’ve discussed whether couples should sign a prenuptial agreement before marriage. While sometimes controversial, a good prenup can protect both individuals were the marriage to result in irreconcilable differences.
Signing a legal document of this type could be helpful if the couple owns substantial assets or if the couple has a wide disparity in income or wealth. If either or both of the individuals own businesses, a prenup could protect those assets — not to mention the lives of any employees relying on those businesses.
With a growing number of adults moving in together before marriage, more people are looking for the protections of a prenuptial agreement without the benefits of getting married. A 2014 Pew Research poll found that 23 percent of adult men and 17 percent of adult women had never been married. However, about a quarter of the “never-married” crowd were currently cohabitating. This means that a good number of unmarried adults are living together without any sort of legal protection.
The Legal Risks of Cohabitation
Cohabitating may seem like a way to get some of the relational benefits of marriage without the legal risks. But, actually, it too can cause legal issues if the relationship ends. Plus, what if you cohabitate for years in a deeply committed partnership, and want to care for your significant other? Having prior legal arrangements can protect your partner, should something happen to you unexpectedly. Beyond that, many unmarried couples also have children. A prenup-like arrangement can protect those kids in the case of a breakup or death.
Related: How Should Couples Combine Finances?
For these reasons, a growing number of unmarried couples are forming legal cohabitation arrangements. These legally-binding contracts, which are drawn up by an attorney, protect each person’s assets, address child custody and support obligations, and more. In short, they cover a lot of the same territory as prenuptial agreements… even if marriage isn’t on the horizon.
What Should Be Covered?
Of course, cohabitation agreements — like prenups — should include asset protection as needed. They should also deal with issues of splitting common assets. But that’s not all these agreements should include. You should also consider:
- Who owns what. Even if you don’t have a business or significant assets, you’re likely bringing some items into the partnership. Your agreement should speak to who owns (and owes) what coming into the arrangement.
- Who pays what. These agreements can act, in part, as a sort of rental contract. This piece is necessary if you’re splitting expenses in a jointly-owned property. It’s even more necessary if one partner is moving into a home that the other partner owns.
- Deed of waiver. If your partner is moving into a home you own and plans to pay rent, consider this option. It basically says that this person has no stake in your home should you break up. You can have this document drawn up separately from your cohabitation agreement, or work this into your larger agreement.
- How things are divided. You may not want to keep a tally of who buys every dish in the cupboard while you’re living together. Avoid this by spelling out how you’ll divide property if you should split up. You can set it up so that what you bring into the relationship goes out with you. If it is purchased jointly, you can divide it up.
- Childcare arrangements. What happens if you should have children? Will one partner stay home to care for them while the other works? Things can get tricky in this sort of situation. So, think ahead of time about how you’ll care for any children you might bring into the relationship — even if you aren’t currently planning to have any.
- Child support arrangements. If you should split up, who will support the children and what might custody look like? Writing these rules into your agreement can prevent a mess later.
- Anything else you want to cover. If you’re working with a lawyer to draw up such a contract, you can customize it. Before you prepare your contract, talk about things like:
- What happens if one partner wants to take time off work to start a business?
- Who handles chores and maintenance tasks?
- Should you void parts of the contract in the case of infidelity?
- What about pets?
To Make it Legally Binding
The cost of a lawyer’s time and expertise to create a cohabitation agreement may be high. Sure, you can get templates that cover the bare bones basics online. But it’s often better to go with the lawyer. They’ll advise you and make sure that the contract doesn’t have any holes. And, of course, you’ll need to go through any processes involved with signing or notarizing the document to make it legally binding.
Don’t Forget About Your Will
Even with a cohabitation agreement, you should both have a will, as well. Cohabitation doesn’t offer the same protections for the surviving partner as marriage. Even if you want all of your assets to go to your partner, that gets tricky without a legal document saying so. Consider writing or revising your wills at the same time that you’re creating your cohabitation agreement. This will help ensure that your assets are disbursed how you want.
Learn More: 3 Must-Have Estate Planning Documents
Prenuptial agreements are important. But cohabitation agreements may be even more so. Without a legal marriage bond, you may be opening yourself up to more complicated legal situations.
Do you believe these cohabitation agreements are necessary? Would you sign one?
Updated May 31, 2017 and originally published May 30, 2017.