Living Together Contract – Property and Finance Clauses

Because a cohabitation agreement is a type of contract, it may be helpful to first clarify what a contract is. A contract is a legally binding document executed by parties that outlines what they are obligated to do and what they are entitled to receive in certain specific situations.

In romantic relationships, the couple can choose to draft a contract that outlines certain specific terms of their relationship as well as defines ownership of any potentially shared property. Examples of this may include what will happen to shared property, for example, a house, if the couple were to break up.

A living together contract may also be referred to as a cohabitation agreement. This type of contract is entered into by two individuals who are not married but are romantically involved and living together.

This type of agreement can outline each of the individual’s rights and obligations related to issues including:

• Child custody and child support;
• Financial support during and after the relationship;
• Distribution of property after a breakup;
• Any joint bank account agreements; or
• Payment of debts during and after the relationship.

Living together contracts protect the rights of the individuals as a couple as well as their individual assets and interests. Due to the fact that unmarried couples may one day break up, it may be helpful to plan ahead in order to avoid any future conflicts.

Marriage is a legal contract between two individuals that protects the rights and obligations that each party owes to the other. A living together contract can govern some of the same issues as marriage as related to finances, property, and debts.

A living together contract may not be useful for every relationship. Rather, it may be most helpful for couples who are likely to accumulate a significant amount of money, property or debt.

This type of contract may also be a good idea for an older couple who wants to make sure their property is distributed in the way that they want upon their death.

What is a Premarital Agreement?

A premarital agreement, also known as a prenuptial agreement, is an agreement that is entered into by a couple prior to marriage. This type of agreement outlines how the assets and debts of the couple should be divided in the event that they divorce.

A prenuptial agreement requires a full disclosure of each individual’s finances and, in general, must be a written document in order to be legally enforceable. The agreement is required to be signed prior to the marriage occurring, or it will not be valid.

A prenuptial agreement will often contain common clauses which are intended to ensure peace of mind for both parties, which may include:

• Property and financial separation: Such clauses protect each spouse’s separate 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, both in divorce and death;
• Division of responsibilities: This clause establishes the responsibilities of each spouse after their vows have been exchanged;
• Child inheritance: If one of the spouses was in a prior marriage, these terms will ensure that the children can keep a portion of the estate. Without this clause, the estate would go directly to the party’s most recent spouse;
• Forum selection: The forum selection clause is included to determine which jurisdiction will govern any dispute that comes up before the wedding;
• Choice of law: This clause will determine what laws will govern any dispute which comes up before the wedding. Forum selection clauses determine the location and form of dispute resolution, while choice of law clauses determine the rules which the couple must follow; and
• Sunset provisions: As prenuptial agreements are contracts for pre-marriage agreements, it could be important for the agreement to state when the contract will end.

This type of agreement is different from the living together contract as it is formed in anticipation of marriage and is not intended to govern the relationship for many years.

What Should be Included in a Living Together Contract?

A living together contract does not have to be complex and may contain plain language. The parties can also include as much or as little detail as they feel is necessary.

These are certain issues that an individual can consider in this type of contract, including:

• Distribution of assets at the termination of the relationship;
• Ownership of property accumulated before, during or after the relationship;
• Payment of expenses;
• Daily responsibilities;
• Dispute resolution; and
• Other issues.

Why are Property and Finance Clauses an Important Part of the Living Together Contract?

If the parties in a relationship are like most individuals, unless they have children, their property and finances are the most important assets that they have. Especially in the context of a living together contract where there are no legal boundaries other than the ones that the parties place on one another, they will want to pay special attention to how their property and finances are handled.

What Types of Things Should my Partner and I Put in our Living Together Contract with Respect to Property and Finances?

• Property owned before living together: Many times the assets an individual brings to a relationship end up being more valuable than the assets they purchase during the relationship. Especially if they are independently wealthy or have inherited assets from a family member, they will want to write something about these assets in their living together agreement;
  • It is important to have some idea where this property will go if and when the relationship ends;
• Property inherited or received by gift during the relationship: No one can plan on inheriting property, but occasionally it occurs. Keep in mind there is a clear division in the eyes of most courts about the difference between things gifted to one party, and items gifted to both partners. An individual will want to keep track of these items, where they came from, and who has control over them as the relationship proceeds;
• Property bought during the relationship: Individuals may choose to divide these assets in one of several ways. One way is to keep track of everything based on who purchased it. Another way is to pool everything and make a decision at a later time. Others may decide to divide based on the percentage of money expended;
  • Whatever the individuals choose is in this regard, it is important to make note of this choice in the contract, and then keep good records; and
• Expenses during the relationship: This is the nit-picky day-to-day stuff such as food, utilities, laundry, and housing. If the parties have equal income, they may share expenses 50-50. The reality is that it is often too confusing to divide things up any other way. If the parties have seriously different income levels, each should contribute in proportion to their income.

What Happens to the Living Together Contract Upon Marriage?

A living together contract may still be enforceable after marriage. In addition, the living together contract must meet the premarital agreement requirements in their state.

Should I Hire an Attorney to Help Me with the Financial Part of my Living Together Contract?

Determining how assets, debts, and living expenses should be handled in a living together contract is very important. This applies especially in cases where both parties enter into the relationship with any types of assets.

It may be helpful to have a contract lawyer review a contract once you have agreed on its terms. Your lawyer can also put the contract into a form that is legally binding.

It is important to note that it is unethical for the same lawyer to represent both sides at the same time, so you should probably have two lawyers look over the living together agreement before you sign it.