1. What is cohabitation?
Living together has never been more popular. According to the 2000 Census data, more than 5.4 million unmarried couples live together. This translates to 10.8 million people. If you have chosen cohabitation over marriage, you are not alone. Cohabitation between married partners has increased more than 1,000 percent in the last 40 years. Many myths still exist, however, about the concept of “living together.” The fact remains that, unless you define your partnership through a legal contract, the law may view you as strangers in the case of a breakup or death.
In recent years, the concept of cohabitation has expanded to include any two partners who have integrated their residence, property and daily lives. It is often seen as a starting point for people headed toward marriage, but it can also be an ultimate arrangement for couples who don’t want the social, personal and legal commitment that marriage represents.
There are numerous other reasons individuals to cohabitate with a partner. These reasons include;
2. What is a cohabitation agreement?
Couples who live together – both heterosexual and same sex – do not fit tidily within the law. In some ways they are treated just like married couples – when applying for a mortgage or working out child support for example – but in other areas, like property rights, pensions and inheritance, they come up against laws which are out of date and frankly messy. The bottom line is that many people who are involved in a long term unmarried relationship gets “burned” if one partner dies, or if the relationship ends.
Unmarried couples can avoid New Jersey’s harsh divorce laws and create a framework to regulate their legal and financial obligations to each other. Unmarried couples can make a cohabitation agreement. The agreement can cover the ownership of the home that may have been purchased during the relationship. The agreement can also cover issues such as vehicle ownership, support issues, and inheritance rights. It is quite ironic that many unmarried couples who choose the apparent free spirit nature of living together rather than getting married, may find out that if they want to protect their legal rights, they often end up with even more paperwork and more issues to sort out rather than less.
3. Why are cohabitation agreements important?
An unmarried couple who lives together can negotiate and sign a contractual arrangement that governs the legal, economic and other aspects of their agreement. Cohabitation agreements are very important in this day and age. It is paramount that all unmarried couples who live together must have a cohabitation agreement.
Unmarried partners who live together without being formally married, do not have many of the legal protections that married couples have. These rights include inheritance rights, the right to make medical decisions for their partner, and the protection of New Jersey divorce laws. In summary, unmarried couples need to have an agreement that addresses the issues that New Jersey divorce laws cover for married couples, but not for unmarried partners.
It is important to emphasize that unmarried couples give up many rights and legal protections that New Jersey divorce law typically provides for married couples. A married couple obtains an abundance of legal rights once they are married. These rights include; the right to receive a property settlement and/or support if there is a divorce; file joint tax returns; receive distributions from estates free of estate tax; receive survivor’s benefits from retirement plans and Social Security; obtain “family” health insurance, dental insurance, and other employment benefits; and automatically share in his/her partner’s property in the event he or she dies without a will.
Unfortunately, unmarried couples do not have the same rights as listed above. However, if an unmarried couple crafts a comprehensive cohabitation agreement, then he or she can generally acquire similar rights.
4. Why should an unmarried couple have a cohabitation agreement?
A contract is no more than an agreement to do (or not to do) something. Marriage is a contractual relationship, even though the “terms” of the contract are rarely stated explicitly, or even known by the marrying couple. Once a couple is married, both spouses essentially subject themselves to a well established set of New Jersey divorce laws and rules. These laws govern the couple’s property rights should one spouse die or should the couple splits up.
Unmarried couples, on the other hand, do not automatically agree to any New Jersey imposed contractual agreement when they start a live-in relationship. The couple may have a joint obligation to a landlord or to a mortgage comply if they rent or buy a home together. Living together, in and of itself, does not create a contractual relationship, nor does it entitle you to a property settlement, or inheritance if you split up or should one of you die as marriage does.
A typical unmarried couple buys property, mixes assets, and invests together without writing down how they intend to share the property if they split up. Then, if trouble about money and property should arise, they usually try to reach some type of understanding and/or a compromise. Sometimes they visit a therapist or ask their friends to help them. If they split up, they quietly divide their possession and o their separate ways, and they are no required to follow the legal rules that apply to a married couple.
But some couple’s relationships don’t end so well. They don’t quietly divide the property and move on. Instead they bring their battle to court. The New Jersey courts have responded to these claims by trying to figure out what the couple had agreed to, and dividing their property accordingly. In doing so, the courts have held that unmarried couples generally have the legal right to create whatever kind of living together agreements they want to. However, the courts have consistently held that these agreements must only focus on financial and property issues, and they must also be fair and reasonable under the totality of the unmarried couple’s circumstances.
All couples hope that their relationships will last forever. However, many people entering new relationships have already been through a separation or divorce, have children from previous relationships, or enter relationships at a time when they are older, more established and have significant assets. Once a person has previously paid both the emotional and financial costs associated with a divorce or separation, they may enter relationships more guardedly. They may be concerned about the possibility of their new relationship failing.
You may think the idea of entering into such an agreement is distasteful and merely indicates that you expect your relationship to fail. However, the “happily ever after” scenario we all grew up with is, sadly, not always the case. Overall, about 60% of all marriages in New Jersey ends in divorce, and the rate are somewhat higher for remarriages. In light of these harsh statistics, is it really that distasteful to plan for such an unfortunate event? Hopefully you will never need to rely on your marriage agreement or cohabitation agreement, but if it becomes necessary, you will require an agreement that is properly drafted.
Even though you may regard your partner as a family member, the laws of New Jersey usually do not. As a result, your partner may not be taken care of in the manner in which you wish. For example, if you die without a will, your property generally will pass to your next of kin and not your unmarried partner. Paradoxically, the law may provide certain benefits for your partner that you had no intention of giving to him or her. Today, some courts are using equitable doctrines to apportion assets between partners to prevent hardship and injustice. Since these doctrines are very vague, they are difficult and expensive to prove. Therefore, you should be proactive and define your own partnership through a legal contract.
Here are some additional reasons to enter into cohabitation agreements;
In summary, an unmarried couple can avoid a host of legal problems by putting their cohabitation agreement in writing. A written contract that addresses the ownership rights of each individual partner is the best way to truly protect yourself. Without some type of written agreement, you may face a serious and potentially expensive battles if you separate and can’t agree on how to divide what you have acquired. Putting your cohabitation agreement in writing does not have to be a time-consuming nightmare. Moreover, it is certainly better than having a judge write one for you as part of an expensive and drawn out court battle.
5. What should a cohabitation agreement cover?
Cohabitation contracts should include the following terms;
6. When should you enter into a cohabitation agreement?
You can enter a cohabitation agreement at any time during your relationship, but it is best to do so before you start to live with each other. Similarly, you should enter into a prenuptial agreement before you get married. A lawyer can ensure that your legal interests are protected by preparing a comprehensive cohabitation agreement.
7. Is it absolutely necessary that I have cohabitation agreement?
You are more likely to need a cohabitation agreement if there is a significant financial imbalance in your relationship. If you are wealthier than your partner, have recently received an inheritance, or you are the owner of a business or home, then you may wish to protect your financial assets with a cohabitation agreement or a marriage agreement. As well, if you or your partner has children from a previous relationship you should also consider a marriage or cohabitation agreement. To determine whether you need a cohabitation agreement, make an inventory of your assets and liabilities and ask yourself whether you are willing to lose half of your net worth in a separation or divorce.
8. How do I ensure that my cohabitation agreement is legally enforceable?
Cohabitation agreements are contracts and can be set aside for the same reasons that a commercial contract could be set aside. Other factors are specific to such domestic contracts. To ensure that your cohabitation agreement will be enforceable at a future time, the following factors should be considered;
9. What is the difference between a cohabitation agreement and a prenuptial agreement?
Couples who want to live together but who have no intention of getting married obtain many significant benefits from signing a cohabitation agreement. It creates a framework for an unmarried couple to handle money and property issues while they live together, and if they should separate.
On the other hand, a couple about to be married may make an agreement that concerns certain aspects of their relationship after they get married. This agreement might cover their responsibilities and their property rights during marriage. This type of agreement could stipulate how the mortgage will be paid and who will stay home to take care of the kids. But more likely, it will determine how the property will be divided, and whether alimony will be paid in the event the couple later divorces. These agreements are also called ante-nuptial or prenuptial agreements.
The major difference between these types of agreements is that in a prenuptial agreement the parties contemplate that they will get married. Meanwhile, a post-nuptial agreement is only for a married couple. Finally, a cohabitation agreement is for a couple that is living together, and it attempts to establish their economic, legal and other ties during and after the end of their relationship.
10. I have been living with my partner for several years. We have now finally decided to get married. Will our existing cohabitation agreement be enforceable even after we are married?
Probably not. The laws of marriage will supersede your cohabitation agreement. To be enforceable, contracts made before marriage that determine money and property rights after marriage must be made in contemplation of marriage. This means that unless your cohabitation agreement is made shortly before your marriage, when you both plan to be married, a court will disregard it.
If you want to convert your cohabitation agreement into a prenuptial agreement, then you must follow these steps;
11. What additional areas should a cohabitation agreement include?
You can tailor your cohabitation agreement to meet the needs of any unmarried relationship. The major areas of concern for most unmarried couples are;
Some unmarried couples choose to keep all property owned before the agreement a car, house, furniture and the like completely separate. Meanwhile, some unmarried couples choose to share some or all of their property by transferring part ownership to each other. You can also specify how you will own property that you acquire during your relationship. (And if you decide not to prepare a comprehensive property agreement that covers this issue, you should use a “joint purchase agreement” for major items of property as you buy them.)
Similarly, you may use your agreement to split income and expenses in any number of ways. You can keep separate bank and checking accounts, credit cards and insurance, or you can agree to handle some or all of these things jointly. In your agreement, you may also want to decide in advance who gets what should you separate, or agree to a process for resolving any property disputes that arise if you part ways.
12. Should I contact a lawyer to negotiate and prepare a cohabitation agreement?
Although you shouldn’t be contentious when you negotiate a cohabitation agreement, you should be careful when signing any type of contract. An experienced family lawyer will “know the ropes” to assist the parties to negotiate and draft a fair and reasonable cohabitation agreement. A shrewd family law who is “in the know” will assist the couple to create a cohabitation agreement that is best one possible for their individual situation. In this day and age, the “one size fits all” cohabitation agreement can lead to a disastrous result. In summary, the more thought and research that go into the preparation of a cohabitation agreement, the better the results will be.
13. My partner and I do not own much property. Do we need a written contract covering who owns what?
If you have not been living together for long and don’t own much property, then it really is not necessary. The longer you live together and the more property you accumulate together, the more important it is to prepare a written contract making it clear who owns what. It is prudent and responsible for taking the time to draft a well thought out contract which clarifies both of your intentions. The failure to do so, might result in an expensive court battle if you split up and cannot agree on a division of the property you have acquired.
14. My partner and I are purchasing a house together. Should we obtain a need a written property agreement?
It is particularly important to make a written property agreement if you buy a house together. Your contract should cover at least four major areas;
15. My partner earns a lot more money than I do. Should we have a agreement covering who is entitled to her income and the items we purchase with it?
Yes. Although each person starts out owning all of his or her job related income, New Jersey law allows this status to be changed by an oral contract, or even by an implied contract. A court may make a finding that there is an implied contract that is derived from the circumstances as to how the unmarried couple lives, and what their lifestyle is. These types of contracts are ripe for misunderstandings and can also lead to a long and bitter court battle. Without a written agreement that specifies whether income will be shared or kept separate, one partner might falsely claim that the other promised to equally split his income on a 50/50 basis. Although this might be extremely difficult to prove in a court of law, the mere thought of a lawsuit is a major problem for many people. It is an excellent idea to make a written agreement if a partner who earns a substantial income is supporting another partner who earns little or no income.
16. What is palimony? Should we make any agreements about it?
Palimony is a phrase invented by journalists and is not a legal concept. It is used to describe the division of property or support paid after the break up of an unmarried couple. Unmarried couples are not legally entitled to such payments unless they have a written agreement (or a court finds there was an oral or implied agreement). A written agreement stating that you both will remain financially independent is the best defense against palimony.
17. Am I liable for the debts of my partner?
Not unless you have specifically undertaken responsibility to pay a debt by cosigning or charging a debt to a joint account. Generally, husbands and wives are liable for all debts incurred during marriage, even those incurred by the other person.
18. If we are living together and one of us dies, how much property will the surviving partner inherit?
Nothing, unless the deceased partner has; a) made a will; b) used another estate planning device such as a living trust or joint tenancy agreement; or c) a contract exists (such as a contract to purchase household furnishings together) and the survivor already owns part of the property. In the case of married couples, a surviving spouse automatically inherits a major portion of a deceased spouse’s property. To protect the person you live with, you must specifically leave him or her property using a will, living trust or other legal document.
19. What are the pros and cons of having a cohabitation agreement?
The major advantage of having a cohabitation agreement is that it helps the unmarried couple clarify their financial commitments. Long term relationships, especially those with children, involve a business partnership as well as a romantic bond. Balancing the budget between income and outgoings, working out who pays what and how responsibilities are shared in running the home – all need sorting out for a harmonious home life. The second major advantage of a cohabitation agreement is that it provides legal protection to both unmarried partners. Most unmarried partners live almost exactly the same as married couples. They certainly should have at least some of the legal protections that a married couple has.
The major disadvantage of a cohabitation agreement is that quite often marital agreements and cohabitation agreements are the subject of litigation to try to have them voided. There’s no absolute guarantee that a court will uphold the terms of a cohabitation agreement. However, if both parties have had adequate legal advice, and if there is a full disclosure of all of the parties’ assets and liabilities, then most courts will uphold the terms of a cohabitation agreement. Another major disadvantage of having a cohabitation agreement is that for many people the process of thinking about and talking through all the sensitive issues that should be addressed is a very grueling process. The very unpleasant areas of death, divorce and illness all must be thoroughly discussed when negotiating a cohabitation agreement. This process involves very long and hard work. Many unmarried couples are very tempted to avoid this process, and to put it off for another day. However, in many cases one partner dies before the couple reaches “another day.” Therefore, in many unmarried relationships the couple often endlessly procrastinates, and they often are never are able to negotiate and sign a cohabitation agreement.
20. What are the top tips for writing a cohabitation agreement?
If one partner is still married to someone else, then it is best to keep all of your property separate until the divorce is finalized. I have been involved in cases wherein a married couple separates, and one spouse moves in with another partner. Quite often the separation lasts for years before the spouses actually file for divorce. In many instances, during the separation one spouse will purchase a home and acquire other assets with his or her new companion. This unfortunate event can lead to a mega disaster. Once the divorce is ultimately filed, then these new assets can be considered to be part of the marital estate, and they can be subject to equitable distribution as well. In this type of scenario, the scope of the divorce will now include three parties; the husband, the wife, and the paramour. These types of divorces often turn into a mega-mess. Moreover, these types of divorces are the culmination of a lack of ethics, plain stupidity, and of poor financial planning. The end result will be a “perfect storm” for a divorce that will take years to finalize. Moreover, the legal fees will cost many tens of thousands of dollars.
21. How should unmarried couples make a joint purchase of an item?
Many unmarried people make several joint purchases of assets during their relationship. In many unmarried relationships the partners often jointly purchase furniture, a vehicle, appliances, a QUAD-ATV, a time share, etc. In this day and age many unmarried couples live just like married couples. The only difference in their relationship is that the married couple has a marriage certificate. In many unmarried relationships there is an unwritten understanding that whoever makes the purchase of the asset also owns it. An illustrative example is as follows: Danny buys the kitchen table and chairs, and Patty buys the lamp and cd player. If they should eventually split up, then each partner keeps the property that he or she brought. Danny and Patty can jointly own everything they brought during the relationship, and then divide it equally if they should separate. If an asset is a “big ticket” item, then it may be advisable for an unmarried couple to prepare an agreement for its joint purchase. This agreement will specify each partner’s ownership rights of the asset, and it will also address the disposition of the asset if the relationship ends.
22. How should an unmarried couple purchase a new vehicle?
It is not uncommon for an unmarried couple to purchase a vehicle together. It is very important to understand all of your options and to choose how title to the vehicle is held by you if you choose to own a vehicle together.
If you decide that only one of you will own the vehicle, you can include the other part as additional drivers on the car insurance. One advantage to sole vehicle ownership: If the vehicle is involved in an accident, only the partner who owns het case can be sued. However if the other partner was diving, then he or she could be sued for negligent actions.
Danny Defendant or Patty Plaintiff
This creates a joint tenancy. If one person dies, the other automatically inherit the car without going through the probate process.
Danny Defendant and Patty Plaintiff
This establishes a tenancy in common. Both signatures are required to transfer title to the vehicle. At death, however, each person can leave his or share to anyone he or she wished. It no estate plan is made then the nearest blood relative inherits the deceased person’s share by the laws of intestate succession. If you want your partner to inherit your interest in the vehicle, they you must include this bequest in your will.
Patty Plaintiff and Danny Defendant as joint tenants with right of survivorship
Not only does this let the survivor automatically inherit the car without going through probate if one of you dies, but it also requires both signatures to transfer title while you are both alive.
23. I have been living with my girlfriend for almost six years. I have paid for her to attend nursing school. Is there any type of agreement that can cover this type of situation?
It is very common for one partner to help out the other with education expenses or support while he or she is in school. It is important to have a written agreement in this situation.
Agreements providing that one member of an unmarried couple will help support the other while he or she goes to school can take many different forms. The main point of this agreement will make it clear that the partner going to school will owe the other partner (who pays all of some of the school bills and supports the student while in school) a certain amount of money. That way, if the couple breaks up shortly after the student finishes school, the non-student partner won’t have paid school bills and have supported the student for nothing.
One way to plan for a fair monetary result is to provide that the person going to school repays the other party for any money expended for tuition and living expenses. This can take the form of a simple promissory note for all of the money paid out.