The longer that unmarried couples live together, the more property they accumulate together. Because these relationships don’t always last forever, it is a good idea for cohabitating couples to write out a property agreement which describes who owns what in the relationship and determines how property will be divided in the event the couple separates.
A property agreement, which may also be known as a “Living Together Agreement” or “Nonmarital Agreement,” is a binding agreement which spells out who owns what during the duration of the relationship and divides a couples’ assets in the event that the couple separates. Unmarried couples buy property, mix assets, and invest together. Sometimes couples who separate without an agreement can mutually agree upon how the assets are divided amicably, but more often than not, break-ups are not amicable and figuring out who walks away with what becomes contentious.
Must a Property Agreement be Written to be Enforceable?
No. While it’s advisable that property agreements be written so there is no ambiguity as to who owns what, in some states, a formal written agreement need not be created. In those instances, so long as the couple acts as though an agreement exists, the court will enforce it. For instance, if one party buys a car during the relationship and is the sole user of the car, the court will acknowledge that party as the owner of the vehicle.
What Kind of Property Agreements are Enforceable?
In general, agreements between unmarried couples are enforceable so long as they cover property (both real property and personal property), payment in exchange for someone giving something up (such as one spouse quitting school to support the other spouse who’s in medical school), and payment for services (excluding sex).
What Should a Property Agreement Include?
Most property agreements include the following:
- How specific assets are owned
- Whether or not income and expenses are shared
- Any newly acquired assets and how they are owned
- What will happen to the property if one party dies
- A list of expenses, such as food, utilities and housing
- Description of property and finances, including property that each party had before the relationship began as well as property accumulated during the relationship
- How to distribute assets in the event of separation, or in the alternative, a plan for divvying up assets (such as mediation, arbitration, etc.)
Should I Have a Property Agreement if I Buy a House with My Partner?
It’s always a good idea to have a property agreement drafted if you decide to buy real property with your significant other. Because buying a house is one of the biggest financial commitments a person can make, it is especially important that a well-crafted property agreement be created.
A property agreement relating to real estate purchases should include the following:
- How the Property is Held on the Deed of the House: Real property can be held as joint tenants with right of survivorship, tenants in common, community property (in community property states), etc.
- How Much Each Partner Owns: A good property agreement should include not only how much each party owns during the initial ownership, but also how ownership can be transferred. For example, if one party can acquire ownership by paying the property taxes each year, that information should be included.
- How One Party can Buyout the Other: Including this can avoid the headache of trying to figure out what is required if one party wants to buy out the other, especially if the couple has separated and tensions are high.
- A clause regarding property rights in the event of a break-up.
Can I Be Liable for the Debts of My Partner?
No. As part of an unmarried couple, one party does not become liable for the other party’s debt unless that is specifically agreed upon by both parties.
Should I Hire a Lawyer to Create a Property Agreement?
A property agreement can be complicated, especially if you own many assets. A good family law attorney can help you draft a comprehensive property agreement. Moreover, if you have a property agreement in place, and you feel that it is not being adhered to, you should contact a skilled attorney near you to help you enforce the agreement.