We have entered a phase in our society where fewer people choose marriage even though they are in a serious relationship and live together. For some, marriage seems unnecessary for a variety of reasons – some became involved because of a pregnancy, others have been married before and have children and no desire to remarry.
But just because people live together as a couple, they should not feel they have any protections similar to those of our divorce laws. People living together are roommates as far as the law is concerned, absent any formal legal agreement.
When people live together without a formal written understanding of how to handle assets and expenses, one party can be putting himself or herself at risk. To avoid these complications, a “living together” agreement that mirrors a prenuptial agreement should be considered.
First, when people live together, only one person may own the residence, but both people may make contributions to the expenses – even the equivalent of rent. Financially, this can be precarious for the paying party, as that party has no equity in the rent. And if the couple purchases a residence together, how have they decided to handle ownership? Are they joint tenants with right of survivorship (meaning the house goes to party 2 on the death of party 1) or are they tenants in common (meaning the estate of party 1 still has half ownership in the house on death of party 1)? Who has the responsibility of making mortgage payments, maintenance and upkeep on the house, utilities and the like, and in what proportion? Who would get these funds back on the sale of the house?
As you can see, a great number of property issues stand out just from sharing the residence. A living together agreement will address all of these in a concrete fashion and can reflect the wishes of the parties and avoid inequity.
Other issues that could arise involve other purchases, vacations, and long term care if one person becomes sick. Couples should think through their living arrangement to see if they have sufficient security in the event of something negative happening.
Another important consideration: how does the residence factor into the estate of each party? If one party dies, does the other remain in a life estate or could the heir of the other party push that person to the street?
In the end, a formal legal agreement that meshes with good estate planning can really help plan for these messy problems that happen with more regularity than you imagine. As with a prenuptial agreement, it may not seem romantic, but it certainly is practical.
If you have questions about living together agreements, contact us – we can help.