Not Getting Married? Co-Habitation Agreements May Protect You If Things Fall Apart

Kate Dore

When you’re flushed with new love, it’s hard to imagine things ever ending badly. But the reality is, breakups do happen. As awkward as it feels, the beginning is the perfect time to discuss one another’s needs in the event of a crisis. If you’re ready to share a home, these conversations are critical. There’s nothing sexy about a cohabitation agreement, but the stakes are too high not to have one.

Married couples may appear to take their spousal benefits for granted, but perks like survivor benefits for Social Security or inheriting property tax-free are valuable. Visiting a partner in hospital or getting details on their medical condition is a lot easier when you’re married. Domestic partners, however, don’t have the same level of protection. A few uncomfortable talks now could spare you both from financial or emotional turmoil later.

Living together and unmarried? Here’s what’s at risk

Living together unmarried in the United States has become increasingly common. According to Pew Research, the number of cohabitating adults is up 29 percent since 2007. Everything goes swimmingly until one partner gets sick, dies, or the relationship ends, and partners are left without the spousal privileges of their married peers. Even the best laid plans can go wrong, and without a roadmap, navigating these challenges outside the bonds of matrimony could prove to be difficult.

“Don’t be so blindsided by love that you neglect your financial future,” says Tiffany Lipscomb, a Candidate for CFP® Certification and paralegal who specializes in estate planning.

The longer you’re together without getting married, the more complicated it gets. Property becomes co-mingled. Partners contribute unequally to living expenses. You buy furniture together. Or maybe animals are part of the picture. No matter how you slice it, it’s complicated to untangle from a live-in relationship.

What happens when the relationship ends

Thinking about your relationship fizzling out is no fun. But what happens when you decide to call it quits? For starters, one partner will be tasked with finding a new place. There’s nothing cheap about moving — especially when you’re forced to do it unexpectedly.

According to Home Advisor, the average cost of moving typically ranges from $485-$1,347. If your unexpected move happens during the summer, you could pay up to two times more. Last minute moves may also mean getting stuck with inexperienced movers or taking extra days off.

Things get hairier if you own anything together. Let’s say you and your partner opened a joint store credit card for a kitchen table, and you’re still carrying a balance. These cards are notorious for high interest rates, making them harder to pay down. Wrestling over the payment plan and who gets the couch could be difficult. There may be fights over smaller things too. Flatware, linens, or even cleaning supplies add up fast when you’re buying them for the second time.

And then there is your financial lives. If you’ve signed a lease or bought a house together, opened a bank account, or co-signed on a car, you could be at risk of losing a lot if things end badly.

“The biggest thing at risk when the relationship ends is any type of asset — like a bank account or property — that is jointly owned,” Lipscomb warns.

The drama only increases if you own a joint bank account. Legally, you have equal ownership of the account. You also can withdraw the full balance without your partner’s consent — and so can they. That’s right, your ex could take off with the money you’ve saved together.

What if one of you gets sick?

The possibility of a disability may not be top of mind in your relationship, but it’s actually a lot more common than premature death. This can be especially devastating if you and your partner aren’t covered by each other’s’ disability insurance. If you didn’t have insurance and could no longer work, would your partner cover the bills? Even a short-term disability could deplete an emergency fund, leaving both partners vulnerable.

“If you’re sharing a bedroom or bank account, you need to talk about what happens if one of you become disabled. Period,” Liscomb says.

The worst-case scenario? One of you dies

Do you want your partner provided for when you’re gone? If you’re not married, good intentions aren’t enough. Your assets need the right titling and a will to make sure they’re handled according to your wishes. Dying without a will—referred to as “dying intestate”—could mean the state decides who inherits your stuff, especially when it comes to things you own alone or accounts without a named beneficiary. This could mean your parents, not your partner, get first dibs on your house or bank account, whether you like it or not.

Key elements of your cohabitation agreement

Luckily, there’s a way for unmarried couples to avoid these pitfalls: a cohabitation agreement. By creating a cohabitation agreement, you and your partner can make sure you’re protected in the same way that spouses are—without having to walk down the aisle.

When you’re ready to create your cohabitation agreement, Lipscomb recommends working with a licensed estate planning attorney in your state. You may limit your chance of future conflicts by making sure these key elements are included:

Purpose – The purpose explains why your cohabitation agreement exists. This should say the agreement is legally binding. This section may also address which state you live in. Adding a choice-of-law provision could protect you if you move to another state with different cohabitation laws.

  • Parties – You need both partners’ full names, address, age, financial, and health status.

  • Disclose of assets and liabilities – Attach a separate document with a full list of each partner’s assets and debts.

  • Duration – The agreement needs to specify how long it will last. Some agreements explain what happens after a period, say 15 to 20 years, have passed. It’s also common to see changes if a child is born.

  • Property rights – This is where you specify exactly how property will be divided. This may include real estate, money spent on each other’s property, options to buy each other out, move out plans, joint bank accounts, how future income and expenses will be handled, and personal property like your vehicles.

  • Children or pets – When there is a child in the picture, it’s more complicated. You need to specify who is legally considered the birth mother and who will pay for education. If you adopted a pet, you’ll need to spell out who gets custody. All too often there’s no plan until it’s too late.

  • Inheritance and wills – This is where you list exactly what one partner will leave the other.

  • Modifications – You need to outline how future changes can be made to the agreement.

  • Acknowledgements – It’s important to acknowledge both partners entered into the agreement willingly and without outside influence.

Your cohabitation agreement is too important to DIY

It may be tempting to draft an agreement yourself, but Lipscomb advises against this. “Most people don’t understand how property titling works—especially within their state. They don’t know what is needed in the agreement,” she points out.

Every state has different rules about what makes the agreement valid. For example, some need one or two witnesses to be present as the agreement is being signed. Other places may require the document to be notarized.

An attorney’s job is to make sure your agreement protects you and is enforceable. “A poorly done DIY cohabitation agreement could actually be worse than no agreement at all,” Lipscomb warns.

She estimates a basic agreement may set you back $500 to $1,000, depending on where you live.

What if I can’t afford a cohabitation agreement?

A cohabitation agreement is well worth the investment but shelling out the cash may not be easy. If you can’t afford to speak with a professional now, Lipscomb still recommends writing down your intentions. Starting a dialogue early—and discussing these things often—is the hardest part for many couples.

Making your agreement enforceable

Working with a licensed attorney is one of the best ways to protect yourself. They know what makes an agreement valid and enforceable in your state. Things like each partner’s consideration, clear property records, and proper disclosures will seal the deal. They may also leave a window of time for reflection.

If you’re living together unmarried, there’s too much at stake to do it without a cohabitation agreement. The agreement should clearly outline each partner’s rights and responsibilities. It should also address what happens if one partner passes away, becomes disabled, or the relationship ends. It’s normal for discussions like these to make you feel uneasy, but it’s possible these tough talks will strengthen the relationship. You will sleep better knowing you are both protected in a worst-case scenario. “The most important thing you can do is fully understand who you’re living with from the beginning,” Lipscomb says.