You Can Do Number 3 Today
You’re in love. You’re spending every night together. The weeks, months, or years go by. Pretty soon the question becomes obvious. Why don’t we just live together? You’re practically doing it already, except paying rent on two places for the privilege.
You’re pregnant. But not married. It’s a surprise, but a happy one, and it forces you and your partner onto the relationship fast-track. You’ve got to set up a nursery, but first, you’ve got to start living together! There’s just one thing: if you’re like many couples, you might be sure you want the baby, but a little less sure you want a husband or wife in the deal.
You’re wealthy. Your significant other isn’t. Even if you’re head over heels, moving in together is a decision that could easily turn out to be as much about money as love.
You’re a non-conformist. You don’t believe in marriage, but you know you’ve found your life partner. You’re ready to do a commitment ceremony, buy a house, have kids, and grow old together, but you just don’t want the state involved.
There are all kinds of circumstances that lead a couple to live together without being married, these are just a few of them. And though every couple who lives together may have a different set of reasons for doing so, they all have one thing in common: they’re taking certain risks, legal and financial, (not to mention emotional) — as a result. But armed with some good information, and a willingness to put all your cards on the table, even if you’re already sharing that table with the man or woman you love, you can protect yourself from this day forward.
COHABITATION AGREEMENTS
Roughly speaking, what a prenup is to marriage, a cohabitation agreement is to living together. A cohabitation agreement is just what it sounds like: a legally binding agreement about what will happen should the relationship break down. It can cover anything from mortgages, inheritances, pensions, and debts, to child support, property rights, your favorite matched set of lamps and who gets the dog.
The idea of cohabitation agreements first came to national attention in the 1970s, when Hollywood actor Lee Marvin got sued for palimony by his long-time live-in lover Michele Triola. The landmark case dragged through the courts for years, ultimately ending when a California judge decided Triola had no claim without a contract. The cohabitation agreement was born.
These days cohabitation agreements are not just for the rich or famous. It is becoming more and more common for everyday couples, whether with or without the help of a lawyer, to prepare a binding legal contract that details the manner in which the couple’s separate and community property will be distributed, should the partnership end.
Family law attorney Jared Laskin of Orange County, Calif., says the following people absolutely need a cohabitation agreement:
1. A high-net-worth individual living with a low-earner, low-net-worth individual.
2. Someone giving up a job or other opportunities to be with the other person based on the other person’s promises.
3. Parties who are going to buy a house together but who are putting title in one person’s name for one reason or another.
Exactly what that agreement should cover is as individual as the couple who signs it, says Leejanice Toback, a senior litigator in family law practicing in Long Beach, Calif. “For instance, if he is moving into her home or she into his – will there be contribution to bills, how much, on what basis? If they are going to be renting a place together and there is a breakup, is one partner going to be left with an expense that he/she can’t handle?” Everything should be worked out in advance.
The time to get a cohabitation agreement, not surprisingly, is before you move in, when you’re presumably still in love, advises Toback. “Once that blush is gone,” the attorney says, “couples may become adversaries, and the fight is draining and expensive.”
Laskin agrees. “The reality is that most people in living-together relationships break up, and the party holding the assets isn’t eager to write a big check to someone he or she no longer loves and may no longer even like.”
BEATING THE ODDS
According to a 2000 study published in the Annual Review of Sociology, 55 percent of all cohabitating couples got married in five years’ time, and the other 40 percent broke up.
Fears about protecting oneself before moving in are not something many people talk about openly. But check into the world of online message boards, and you’ll find all kinds of hand-wringing around cohabitating. Here’s a typical example, from a woman in Minnesota: This guy I really like has debts. He doesn’t want to get married, and I am okay with living with him. How do I protect my assets and stay independent of this guy’s debts so I am not financially responsible? Thank you in advance for any constructive advice. This woman has the right idea, but let’s hope she went beyond an internet message board for legal advice!
But if she didn’t, she’s certainly not alone. Many couples go apartment-hunting, sign a lease, and pick out paint colors without digging deep into topics such as money and property, much less getting something in writing. The reason, attorneys say, is simple: they either don’t think they need an agreement, or they don’t want to know if they do.
“In the first six months of a relationship, everyone looks perfect,” explains Toback. “Both parties have stars in their eyes and do not want to envision a breakup. A lot of people have the attitude that if they talk about it, they will jinx it. But sometimes, couples have problems getting completely honest with each other. Especially about money.”
“Finances are a touchy subject,” Toback continues. “Many people don’t want to disclose their finances, even to someone they are intimate with.They may want to look richer or poorer than they are. If one person discloses that they make twice as much as the other, they may be expected to contribute more.Talking about money and budgets is uncomfortable, especially in a new relationship.”
“It’s not hard to figure out that if you can’t be completely open with your partner about your finances, maybe you’re not ready to live together, but just try telling that to two people who are in love”. Toback tells the story of a California woman who found this out the hard way. While engaged, she bought a house with her fiance, and put both their names on the deed. But only her name went on the mortgage. The couple never made it down the aisle, and he moved out. Two years later, the man sued her for his share of the house, including all the appreciation.
“Without legal protection like a cohabitation agreement, the court sided with the man, (his name after all, was on the deed), and he ended up forcing the sale of the house and claiming close to half the profits. And because only the woman’s name was on the mortgage, the responsibility for the monthly payments, upkeep, and taxes, was still all hers,” Toback says.
WHEN IT’S TOO LATE
So let’s say something does go wrong, then what? If the two people can’t reach an agreement on their own, a judge may have to do it for them. “Depending on how much money is involved, that can take place all the way from small claims to superior court,” says Toback.
Attorney Laskin says lawsuits are usually filed to enforce promises made during the relationship, whether explicit or implied. But, be prepared to pay dearly. “The person filing the lawsuit is going to have to pay either large hourly fees to an attorney or a big percentage of their recovery as a contingency fee,” Laskin explains. “And on top of that he or she will probably settle for less than he or she is entitled to due to the uncertainty of litigation.”
In other words, even if you’re in the right, it’s often quicker and less expensive to take less money than spends thousands of dollars fighting for what may be legally yours.
THE BEGINNING IS THE END
An ancient saying states that within every end, is a beginning. The opposite is true as well. Within every beginning, there is also an end. When it comes to cohabitating, a wise person considers that the end may very well be until death do you part. Or it may not. The bottom line is, cohabitating has legal consequences, and like anything legal, you’ve got to get it in writing. On this, Laskin has the final word: “People don’t like to think about unpleasant things like death or the break-up of a relationship, so they don’t think about them.” True enough. But when it comes to cohabitating, choosing to dive in blindly just might end up costing you a bundle.
Do your research. If you can afford it, go to a lawyer. If you can’t, there are a number of good books on the subject, and standard forms you can download for free online. You can then amend them to suit your particular circumstances.
2. Decide what your cohabitation agreement will cover.
Make sure it covers the three biggies:
A. Assets. Are you sharing, or are they separate?What happens when one party contributes money or labor to an asset?
B. Support. Does either party have an obligation to support the other? After the relationship ends?
C. Is either party obligated to pay the other for services?
3. Know Thy Partner.
Investigate. Does your partner have a good financial track record and good credit? It may sound basic, but you need to know. You can ask for documents up front, or you can do a little digging around online. After all, trust works both ways: Of course, you trust your partner, and if your partner trusts you, they won’t mind giving you all the financial details.
4. Don’t Put All Your Eggs in One Basket.
Don’t be in a hurry to go into business with your partner, or buy a house, if you don’t have to. Moving in together is a big change. It’s wise to let the relationship find its footing for six months to a year before making any other major decisions.
5. Be Realistic.
The divorce rate is almost 50 percent, and the failure of cohabitation relationships is even higher.” Be guided by the reality that it may not work out,” one lawyer suggests. “And if you’re lucky, you won’t need Plan B.”
6. Keep Your Own Place.
Not very romantic, and not economically feasible for many, but if it is, it’s a great option. Consider renting or subletting the place you live in now. It’s a way of easing the transition into living together and is especially worthwhile if you have kids who might be deeply affected if the relationship doesn’t work out.
7. If You Have a High Net Worth.
Attorneys say you have an extra incentive to maintain good boundaries and get it all in writing. At the very least – keep all your finances separate, and make it clear that cohabitating is not a promise of lifetime support. And, you should definitely see a lawyer.
8. If You’ve Been Promised Financial Support.
It doesn’t mean a thing if you don’t have it on paper. Get it in writing. And don’t move in until you do.
