Do you live with your romantic partner but aren’t hitched? Or did you and your significant other just decide to move in together? If so, it could be worth considering whether you’d like to both sign what is known as a cohabitation agreement.
Of course, sharing a household can bring many benefits. But there are also complicated situations that can emerge and some financial and legal risks.
A cohabitation agreement is a mutually agreed-upon document that helps protect you legally and make sure that both members of the couple are aligned on key aspects of living together. It also typically covers what would happen if you two decided to split up.
Here, you’ll learn the definition of a cohabitation agreement, what it covers, and key considerations when you and a partner decide to share a home.
What Is a Cohabitation Agreement?
Also known as a living together agreement, non-marital contract, or “no-nup,” a cohabitation agreement is a legally binding contract signed by two people who live together or are planning to move into the same home.
Like a prenup or postnup agreement, a cohabitation agreement is designed to address the variety of personal and financial issues you and your partner may face in the event of an emergency or a breakup, such as who will retain ownership of property acquired before the relationship started and who will keep property purchased together.
This formal agreement not only protects assets that you bring into the relationship, but can also be a way to ensure clarity during your relationship and help you and your partner start talking about money.
Your cohabitation agreement might, for example, detail how living expenses will be divided or whether your money will be kept separate, fully combined, or partially combined.
A cohabitation agreement can also include health care directives and address issues involving your children or children from previous relationships.
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Who Should Get a Cohabitation Agreement?
People who are older, and therefore tend to have more assets and more complex financial lives, may be more likely to benefit from the protection provided by a cohabitation agreement than those who are younger and just starting out.
However, any couple can benefit from a cohabitation agreement because your lives automatically become financially intertwined when you move in together.
When you live with someone, you will likely both be responsible for paying the rent or mortgage (and related expenses) and for paying any bills, such as utility bills. And, both of your names may be on the lease or the mortgage.
Plus, you’ll both be counting on this as a place to live. You also may join other aspects of your lives, such as buying furniture together, getting a pet together, or having children together.
A cohabitation agreement can spell out how you will share responsibilities during the time you are living together. It can also help you in the event that you decide to part ways and need to determine who gets what. It can be easier to discuss and agree on these issues when you’re in love than during a potentially difficult separation.
(If you are unmarried and buying a property together, that will likely require a different agreement.)
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How Do I Get A Cohabitation Agreement?
Because cohabitation agreements are legal contracts, it can be a good idea for each partner to get an attorney to help negotiate and draft the agreement. Getting legal help ensures that the contract will be enforceable and that each party knows his or her rights.
If you’ve already discussed and agreed on most of the parameters, hiring a lawyer to draft the document shouldn’t be all that costly (and can save you a great deal of money if a dispute arises down the line).
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If you’d prefer not to hire a lawyer, you can find free templates for cohabitation agreements online. You can also write your own contract, but you may want to keep in mind that this may make it less likely the agreement would be legally enforceable. The contract can still be useful, however, if you’re both willing to abide by it.
Regardless of how you choose to create your agreement, here are some things you may want to consider including in your cohabitation agreement:
• Whether one or both names will be on the lease.
• How rent will be divided.
• Whether owned property will have both names on the deed and who will be responsible for paying the mortgage.
• Who will pay bills, utilities, insurance, and other household expenses.
• Whether you will keep finances completely separate or create a joint account.
• How shared purchases, such as furniture, will be made.
• Who will remain in the home in the event of a breakup and how the other partner would be compensated.
• What property is considered separate and what property is considered joint (say anything from furniture to a joint brokerage account) and how will the latter be divided in the event of a breakup.
• Who will assume responsibility for any pets if a breakup occurs.
• Who is responsible for managing or paying off debts incurred by the couple during cohabitation.
• Who is responsible for debts incurred prior to cohabitation.
• Whether a higher-earning partner will be responsible for paying any support to the other partner after a breakup.
• Whether or not the agreement will remain in effect if you get married.
• What happens to shared property if either party passes away.
If you have children and/or are planning on having children together while cohabitating but not married, there may be additional issues you will want to address in your agreement. In this case, getting legal advice can be a wise idea due to the added complexity of your situation.
Once the agreement is written, each partner will need to sign it and keep a signed copy for themselves. It can also be a good idea to have your signatures notarized. While notarization won’t guarantee that a court will find your agreement legal, it will make it easier to prove that both of you signed and agreed to it if you ever have to go to court.
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The Takeaway
When you move in with a romantic partner, you will likely be sharing more than a place to live but also expenses and other financial interests.
A cohabitation (or living together) agreement protects the assets you acquired before living together and also specifies how assets and debt acquired during cohabitation will be shared.
A cohabitation agreement can protect your rights and also help you and your partner communicate about big issues, such as how you will divide up the rent and other household expenses and purchases, and whether you will keep your finances separate or open up a joint account.
If you decide to merge at least some of your money, you may want to consider opening a new bank account.
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