Avoiding a Costly Cohabitation ‘Divorce’

By Joslin Davis

As an increasing number of couples agree to live together rather than marry, attorneys are seeing more and more cases involving break-ups leading to the courtroom. According a recent survey of the American Academy of Matrimonial Lawyers (AAML), 45% of the members find that legal disputes between unmarried couples who had previously lived together have been on the rise during the past three years. In all, 26% have cited an increase in cohabitation agreement requests from unmarried couples.

It is important to remember that not being married does not prevent a partner from attempting to make a claim on your assets once a live-in relationships ends. Even without marriage, a growing number of live-in relationships are producing a wide range of legal complexities that consequently require the involvement of legal counsel. If cohabiting partners do not have a mutual understanding of their financial obligations to one another during their period of cohabitation, and at the time it ends by separation or death, the legal consequences may lead to financial devastation for one of the partners. It could also produce significantly complex property disputes that cause both sides to incur substantial legal fees to address.

Cohabitation Agreements are designed primarily to protect financial interests, provide for financial support, and help with property division. Unmarried parties can enter into cohabitation agreements that address child custody and child support, but such provisions may not be controlling if either party ever brings a court action for custody or child support.

Before moving in with a partner, a previously signed cohabitation agreement can serve as an effective tool to ensure that your finances and assets are adequately protected. In all too many circumstances, unmarried cohabitants are putting their labor and own money into a live-in relationship, many of which are long in duration, because they ultimately expect that they will receive benefits from the other party arising from the commitment to be in a long term relationship. In many cases, those expectations are dashed when the relationship ends without the benefit of a cohabitation agreement.

For example, one of the cohabitation partners might decide during the period of cohabitation to stop working and focus on the home and be the primary caregiver for the couple’s children. There are often unstated expectations that both parties have under these circumstances. The stay-at-home partner may expect some financial support for himself or herself only to discover at the end of a long relationship that under the state’s common law, there is no duty of support to an unmarried cohabitant. Another example is when one partner may imply that he or she will include the other as a beneficiary upon death. If that partner fails to do so, then there may be no rights of inheritance of unmarried cohabitants, or receipt of benefits upon death of the other, without a written cohabitation agreement setting forth those rights.

In order to minimize doubts and to ensure that both parties understand each other’s expectations arising from their cohabitation, it may be wise to secure the protection of a legal cohabitation agreement. Otherwise, your resident state’s common laws will apply by default.

As long as both sides have a mutual understanding about their financial circumstances, having a cohabitation contract clarifies the expectations arising from the live in relationship and makes the mutual promises contained in the agreement easier to enforce. Having a written contract is a way to memorialize the mutual agreement which will provide legal protection for the parties to the agreement in the event the relationship ends by separation or death.

Some general tips to consider before moving in with someone, include:

• Consider the possibility of have a cohabitation agreement drawn up if you are bringing funds and assets into the live-in arrangement or if you will be devoting time and labor to the relationship.

• Consult with an attorney to discuss items the cohabitation agreement can and should cover. There are some unique tax rules that apply to unmarried cohabitants that do not affect married couples such as gift tax concerns. Estate and inheritance issues are also unique regarding unmarried cohabitants. Because of the very important implication of these matters, it is highly recommended that a trusts and estates and tax expert be consulted.

• Compile a complete and accurate outline of all your assets, finances, and debts.

• Specificity is crucial, so it is important to have detailed information. The document will accurately reflect the intentions of the parties and is drafted to avoid any ambiguities that could cause a future dispute.

• Discuss expectations with your partner before cohabiting and do not make assumptions about any implied financial arrangements.

If you are considering living together with someone, you and your partner may want to look into obtaining a cohabitation agreement to protect your financial interests, provide for financial support, and effectuate property division. These agreements are highly effective tools that minimize misunderstandings and disputes, which can then potentially save significant amounts in future legal fees if a contract is in place at the beginning of the live-in relationship.

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