Issue 3.11
Cohabitation is a way of life that has become more common even among older couples. There are many reasons couples chose to live together rather than marry, including reducing living expenses, or not wanting to give up certain assets (i.e., social security or other retirement benefits) that may be lost if a person remarries. However, unless you define your partnership through a written legal contract known as a Cohabitation Agreement, you may be taking a great risk.
Although you may regard your partner as a family member, the law may not. As a result, your partner may not be taken care of in the manner in which you wish, or inherit your estate should you pass away. Paradoxically, the law may provide certain benefits for your partner that you had no intention of giving to him or her. It can happen that a common-law marriage arrangement can be assumed by the courts if you have a general reputation of being husband and wife. The courts have precedent to use equitable doctrines to apportion assets between cohabitants to prevent hardship and injustice.
It is far better to be proactive and to define your own partnership through a Cohabitation Agreement, a private contract between cohabitants. It is a powerful tool for disclosing the financial and personal expectations of the relationship. It can prevent misunderstandings and legal battles. It contractually establishes the rights and obligations of the parties.
The attorney drafting the Cohabitation Agreement will outline the parties’ wishes regarding property and the possible sharing of any assets, as well as the terms of the relationship. It can cover any financial aspect of the relationship, including, but not limited to, the distribution of property in case of death or breakup, obligation for (or elimination of) financial support during the relationship or upon its dissolution, the responsibility of each party for specific debts, ownership of the principal residence upon breakup of the relationship, definition of support, custody or visitation rights for minor children, specification of health insurance coverage, determination of the right to serve as guardian/conservator in the event of incapacitation, and establishment of the right to make medical decisions. Each partner should have individual legal advice, and the contract ideally should be drawn up prior to living together.
It is important to note that there is a difference between Cohabitation Agreements and Prenuptial Agreements. Cohabitation Agreements are governed almost exclusively by general contract principles. They usually are no longer valid if the parties eventually marry. A Prenuptial Agreement goes into effect only upon marriage and is binding throughout the marriage unless both parties agree to modify it.
From the viewpoint of Estate Planning, a Cohabitation Agreement can eliminate concerns that your cohabitating partner may, against your desires, attempt to access your assets upon dissolution of the relationship or upon your death. Your rights and obligations would have already been set forth in your Cohabitation Agreement. Conversely, a Cohabitation Agreement can help ensure that your assets will go only to your choice of beneficiaries, which may include your cohabitating partner if you so wish.
Jeffery J. McKenna is a local attorney serving clients in Utah, Arizona and Nevada. He is a shareholder at the law firm of Barney, McKenna, and Olmstead with offices in St. George and Mesquite. If you have questions you would like addressed in these articles, you can contact him at 435 628-1711 or jmckenna@barney-mckenna.com.