Cohabitation Agreement vs Prenup Agreement: Know Your Options

As cohabitation and prenuptial agreements are types of contracts, it is helpful first to clarify what a contract is.

A contract is a legally binding agreement between two or more parties outlining what they are obligated to do and what they are entitled to receive in a specific situation. To execute the contract, there must be:

• An offer of something to buy, sell, or be done.
• Acceptance of the offer.
• Consideration, meaning each party is giving something up.

Cohabitation Agreement

Contracts are not just about things and money. In a romantic relationship, couples can draft a contract outlining the terms of their relationship and define ownership of any shared property, such as a house.

This is called a cohabitation agreement or a “living together” contract. This is a special contract between two people who live together as if they were married, but they’re not. Cohabitation agreements typically deal with property, debts, health care decisions, gifts and inheritances, and other estate planning considerations. The agreement creates a mutual understanding of the obligations the partners have to one another to lay out what should happen in case the relationship dissolves, or one of the partners passes away. It establishes rights and obligations normally conferred upon marriage in most states.

However, these individuals are romantically involved and living together. This sort of agreement can outline each person’s rights and obligations for issues such as:

• Distribution of property after a breakup
• Ownership of any joint bank accounts
• Payment of debts during and after the relationship
• Financial support during and after the relationship (alimony), especially when one spouse opts to fulfill an unpaid caretaking role instead of paid labor outside of the home
• Who will be named on the property deed or the rental lease
• Who is responsible for making mortgage payments or paying the rent during the marriage and after it has ended
• Who is responsible for paying bills, utilities, and other expenses
• Responsibility for debts incurred prior to cohabitation and together during cohabitation.
• Child custody and child support
• Whether they agree to go to mediation to address disputes before escalating them to court

A cohabitation agreement can also outline reasonable expectations of life quality during the relationship (i.e., the frequency or funding of leisure, health, or daily life activities).

Some struggle with whether to invest time and money into a cohabitation agreement. Remember that cohabitation agreements can be inexpensive compared to the potential legal fees if there is a breakup or a death with no agreement in place.

What Happens to Our Cohabitation Agreement if We Decide to Marry?

Cohabitation contracts only apply to unmarried people. If they decide to marry, they could write a new agreement – either a prenuptial or postnuptial agreement (or both). The decisions they make in that document will control what happens if they divorce or if one dies. If they don’t sign a prenup or postnup, state laws will determine what will happen concerning property, children, spousal support, and more.

Prenuptial Agreement

A prenuptial agreement is also known as a premarital agreement. A prenuptial agreement is written for a couple expecting to be married soon. Similar to a cohabitation agreement, a prenuptial agreement outlines how the couple’s assets and debts are to be divided should the couple divorce or one spouse die.

Prenuptial agreements require full disclosure of each person’s finances and generally must be a written document to be legally enforceable. The document must be signed before the marriage occurs, or it will not be valid.

Prenuptial agreements often contain common clauses which are intended to ensure peace of mind for both parties. Some examples of such clauses could include:

• Property and financial separation: These clauses protect each spouse’s separate property from becoming joint property and protect one spouse from the other’s debt
• Alimony: This clause is used to determine the level of support owed to a spouse if they divorce
• Division of Responsibilities: This clause establishes the responsibilities of each spouse after their vows have been exchanged
• Child inheritance: If one of the spouses were in a prior marriage, these terms would ensure that the children can keep a portion of the estate. Without this clause, the estate would go directly to the most recent spouse
• Forum selection: The forum selection clause determines which jurisdiction will govern any dispute before the wedding. This is primarily important if the engaged couple lives in different states
• Choice of law: This clause will determine what laws govern any dispute before the wedding. Forum selection clauses determine the location of dispute resolution, while the choice of law clauses determine the rules which the couple must follow
• Sunset Provisions: As prenuptial agreements are contracts for pre-marriage agreements, it could be important for the agreement to state when the contract will self-expire

Should I Enter into a Prenuptial Agreement Instead of a Cohabitation Agreement?

If a couple only lives together without the intention of getting married, they may only enter into a cohabitation agreement.

If the couple plans on getting married at some point, they may enter either one. Generally speaking, they are usually better off with a prenuptial agreement since the time and effort put into writing a cohabitation is not less than the time of writing a prenup, and only a prenup will survive past the wedding.

However, a couple planning on getting married may still enter into a cohabitation agreement to provide coverage for the time leading up to the wedding if the wedding date is far off. People do not generally sign a prenuptial agreement until shortly before the wedding.

While these two binding contracts can be similar, marriage is the key difference between a cohabitation agreement vs. a prenuptial agreement. Cohabitation agreements are made between partners who want to live together but remain unmarried. They can include a provision about what should happen if the couple decides to get married. It could even state that the couple should then draw up a prenuptial agreement.

Should I Talk to an Attorney about Cohabitation and Prenuptial Agreements?

If you are considering entering into a cohabitation or prenuptial agreement, consulting with a skilled and knowledgeable family lawyer is in your best interest. An experienced local prenup attorney can help you determine which sort of agreement would best suit your needs and can draft a fair and legally sound (enforceable) agreement for you.

An attorney will also be aware of any specific state laws that may affect your case. Finally, an attorney can represent you in court if any issues arise.