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Un-Married Couples

FS-Cohabitation Planning Is Ultra Important
Jan L. Warner & Jan Collins

Question: My partner and I (both in our late 30s) have been together for three years and intend to purchase a home. I am the higher wage earner, and she does some web design and keeps up our apartment. We do not want to be married. We met with a lawyer who told us to title the home jointly. Are we missing something as I will be putting up all of the downpayment and will be making the monthly payments?

Answer: Your lawyer is missing plenty. Because the issues surrounding unmarried couples are complex, you and your partner should not attempt to make final decisions until you seek competent legal help. Living together can be especially tricky for individuals after one or both partners has had a traditional marriage, especially if there are children and/or obligations to an ex spouse, not to mention other complex issues that may be carried into the new relationship, making cohabitation relationship more stressful and more difficult that a traditional marriage.

In our view, no matter what else you do, it is wise for you and your partner to sign a cohabitation agreement before you finalize your plans. A cohabitation agreement is a written contract that can regulate your future relationship and allow you to retain control of your lives.

Then there are the potential financial landmines that must be addressed: Will your partner be signing the note regarding the purchase of the home? Does she have a poor financial history -- have judgments against her that prevent her from owning property? Has she gone through bankruptcy?

Today, more than ever, unmarried cohabitants must be attuned to the issues, become informed, and attempt to avoid what could otherwise be disastrous consequences. Coordinated planning and use of written documents is especially important for unmarried couples.

Setting aside the need for powers of attorney for finances and health care and wills, you and your partner must have a co-ownership agreement regarding the purchase of this home. While buying the house may be relatively easy, disentangling yourselves from the arrangement should your relationship terminate - or should one of you die - can be most difficult and expensive because then, you donít have the remedies that are available to married couples. Despite the way the law may look at your relationship, when you purchase a residence together, you become "married" financially. That's why it's best to plan ahead, to design your remedies, and to try to avoid the many potential pitfalls through a "co-ownership agreement" at the time you purchase property.

Without a co-ownership agreement that clearly defines your intentions and mechanisms to resolve any disputes, you will be forced to depend upon expensive, yet inadequate, legal remedies that will probably not reflect your intentions. And since there are not automatic inheritance laws, you must plan for what will become of the property if one of you dies.

The way in which your property is titled can also be a method by which you and your partner apportion ownership and divide proceeds on sale. For example, if your comparative initial contributions and continued payments justify it, title ownership could be allocated 60 percent to you and 40 percent to your partner. But in many instances, this could lead to an unfair division of the sales proceeds if, for example, you and your partner make unequal portions of the down payment but pay equally toward mortgage payments, taxes, and maintenance -- or if there is significant appreciation in value. Even if you and your partner have made unequal contributions, dividing the proceeds can also lead to disputes. What this all means is that your plans and intentions should be clearly dealt with in a co-ownership agreement that addresses your intentions and the potential contingencies before the fact, not later, when there are no options.

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