When an unmarried couple lives together, it is very important that they create a property agreement that explicitly states who owns what if the couple separates. Unmarried couples that live together long-term are likely to acquire a great deal of shared property. Without any kind of legal agreement, you are at risk for conflict or a time consuming legal battle regarding your property rights in case of a separation.
A cohabitation agreement should be tailored to the specific needs of your relationship. Things that agreements commonly include are:
- How certain assets are owned
- How income and expenses are shared, or if they are shared at all
- How recently acquired assets are owned
- How bank accounts, credit cards, insurance policies, and other assets are managed
- How specific assets will be divided in case of a separation, and what process will be used to resolve conflict.
One of the most important assets for an unmarried couple to divide is the house. The home where the couple cohabitated is not only a major financial responsibility, but it can also carry emotional ties. Take extra care and time when including the purchase of your home in the cohabitation property agreement. At the very least, the contract should cover a few main points.
First of all, the agreement should state how the ownership is listed on the deed of the house. There are a few ways a couple can own a house together. If you own the house as joint tenants with right of survivorship, one of you will automatically inherit the house in case one of you dies. If you own the house as tenants in common, when one party dies the house will go to whoever that person names in their will. If no one is named in a will or trust, the house will be distributed according to state law,
The cohabitation agreement should also state how much each partner owns. It should also include how any portion of the home can be transferred between the partners, Additionally, the agreement should specify any buyout rights, and how the house will be appraised. Typically, people will have their original realtor appraise the house, then they will allow one partner no more than 5 years to pay the other partner for the home, However, such an agreement can and should be tailored to suit the couple’s specific needs.
The agreement also needs to include what happens to the house if the couple breaks up. This is very important to include to avoid conflict. State how the proceeds will be divided upon sale, who will live in the house if it is not sold, or what a buyout plan would be.
It is important to note the eviction laws present in most states. If a person has been living with you for a certain number of months, they have the legal right to continue living there unless you pursue a formal eviction to remove the person from the premises.
Lastly, unmarried partners have no rights to support, unless it is previously agreed upon in the cohabitation agreement. Unmarried partners are also not responsible for each other;s debt, unless they have a joint account or one is a cosigner or guarantor for the other.