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Do I need a cohabitation agreement?

Today, it’s not uncommon for couples to decide that they want to share their lives together with no immediate plans to walk down the aisle. Often children of divorce themselves, many couples find the idea of marriage to be a gamble or unnecessary for having a fulfilling, long-term relationship with their partner.

However, many people still don’t realize that cohabiting can be just as complicated as  a marriage but with fewer protections. Even if you someday plan to get married, cohabiting with a partner without a cohabitation agreement can be risky for both parties. Unmarried couples do not have the same legal protections no matter how long they live together.

How Does It Work?

Cohabitation agreements are legal contracts that act much like a prenuptial agreement – though they won’t become a prenuptial agreement automatically if the couple does decide to wed. Just like a prenuptial agreement lays out how things like property and debt will be handled in divorce, a cohabitation agreement provides a similar roadmap if the relationship ends.

Cohabitation agreements should also spell out any agreements or expectational about things like how expenses will be paid, what will happen with any joint purchases, and whether either party will have any claim based on financial or other contributions to assets or accounts in the name of the other. A common example is when one cohabitant owns the home where they both live, and the other invests time and labor remodeling the residence, contributes to the mortgage or makes other efforts that enhance the home. The cohabitant who expected to share in the value of the home could walk away empty handed without an agreement. Conversely, the homeowner who assumed the funds or efforts were intended in lieu of rent as fair payment for the use and enjoyment of the residence could face a nasty legal claim.

Not every couple who lives together will need a cohabitation agreement. But a contract can be a good idea for long-term relationships with a lot of shared property or older unmarried couples who want their property distributed as they wish upon their death. Without an agreement, there are no guarantees on how property will get distributed.

What If We Decide To Get Married Eventually?

If you and your partner ever change your mind about tying the knot, a cohabitation agreement might  serve as a template for drafting a formal prenuptial agreement for the marriage, but it cannot automatically convert into a prenuptial agreement. These contracts can be an excellent opportunity to communicate and negotiate about the things that matter most in the relationship and ensure everyone is on the same page.

Whether you are just moving in with your partner or have been cohabitating for a decade, it’s essential to take steps to protect both of your interests. Even if you have intentions to get married, it’s important to clarify your respective financial goals and expectations.