Cohabitation: living together contracts protect unmarried couples

The number of unmarried couples living together increased tenfold between 1960 and 2000, according to the U.S. Census Bureau's most recent decennial report. At the time of that census, 11 million people were living with unmarried partners, including both same-sex and different-sex couples.

Though it's not the way many couples choose to view their relationships, all of them will end eventually, through death if not through break-up.

Unlike married spouses, unmarried couples do not enter an automatic contract when they begin a committed relationship with one another. If they want to establish what will happen to their property (and/or debt) when they separate or one partner dies, they must develop their own rules.

A living together contract shares a lot in common with a prenuptial agreement in that both spell out how couples will handle the financial aspects of their relationships. They are especially helpful for couples who have significant assets, who buy property together or for couples where one or both partners have significant debt.

Courts are prepared to get involved in the division of assets among unmarried partners, but living together contracts can help couples make those decisions themselves while also avoiding expensive court costs later. They also help many couples avoid future problems by talking through potentially divisive issues, such as budgeting and spending, at the relationship's outset.

Living together contracts can be as comprehensive or as specific as the couple needs. Some couples are only concerned with real property issues and can meet their needs with a joint tenancy agreement. Others may have more complex issues, especially if they are accumulating property or debt.

In these cases, couples may want to consider clauses regarding property owned before the relationship, property received by gift or inheritance during the relationship and property purchased during the relationship. They may also consider provisions for household expenses or debt both during the relationship and at its conclusion. Partners may want to do some estate planning, including financial and health care powers of attorney should a serious injury or illness occur to one or the relationship end upon the death of one of the partners.

It's also a good idea, whenever constructing a contract, to determine how you will resolve disagreements that may arise from it. You may include a provision for mediation or binding arbitration as a means to save court costs later.

If you and your partner ultimately decide to marry, you should consider replacing your cohabitation agreement with a prenuptial agreement. Prenuptial agreements have different requirements to be considered legally binding.

In any event, it's wise to sit down together to flush out the details of your partnership before moving in together. A qualified family law attorney can help you look at your objectives and the best means for accomplishing them.

Reprinted with permission from Holmen Courier and Onalaska Community Life, August 4, 2006