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Do I need a COHABITATION AGREEMENT?

Q. I am thinking about asking my girlfriend to move in with me. Should I be considering a Cohabitation Agreement and what would it say?


A lawyer's job is to give conservative advice that protects clients from both seen and unseen potential legal consequences relative to the circumstances that are unique to these client's lives. Family law attorneys are reminded every day that most nonlawyers never consider that their new (or old) relationship might one day breakup or dissolve and if so what the fallout might be in terms of property, debts, or even support obligations. People are particularly vulnerable for setting themselves up for future legal difficulties in the early stages of relationship. This is the time when they are least likely to seek family law legal advice but when they need it most.

I commonly encounter several sets of circumstances that justify executing cohabitation agreements, and which affect how they are written and what provisions to include:


Protecting Assets and Income of One Person

Where one partner brings into the relationship assets, debts, or an income stream which is proportionately greater than that of the other partner, the partner in the financially superior position may reasonably be concerned about protecting what they have. I call these "limiting agreements" because their aim is primarily to ensure that the other partner acquires no interest (or only specified interests) in property which is already owned or that is acquired during the relationship - typically through the use of joint bank accounts, joint borrowing, inheritances, or by just plain inadvertence.

Often one partner in these situations has a near zero net worth. The economic reality in our culture is that this is usually the woman, who may also be a custodial parent of a minor child and under economic pressure. The fact is that our culture values the contributions of partners quite differently depending upon whether that contribution is in the form of money, property, or services. People joke about being called 'domestic engineers' and we may talk about women not being employed 'outside the home.' Families are not merely emotional and social units, they are also economic units. Coupling enables people to specialize between themselves so that one person can devote a greater percentage of attention to the job marketplace, for instance, while the other can invest their energies in establishing and maintaining a stable and supportive home environment.

We act as though money is the more valuable contribution to relationship when this may not at all be true. Any sociologist will tell you that if we were to count the hours that most women spend taking care of the home (and especially children), which frees the man up to work for money, and then value this time at a reasonable rate, the economic worth of the non cash contributions by domestic engineers often exceeds the value of the wages earned outside the home by the working partner in most low to middle-high income partnerships (illustrated if you consider what it would cost some outside worker to perform these tasks).

Whether the monetarily disadvantaged partner is a man or a woman, this person's interest lies in avoiding limiting agreements or in having them crafted so that some level of financial protection exists. There are compromise solutions that can be achieved which afford these persons protections they would not otherwise have, which is good reason for obtaining guidance from a qualified attorney.

If partner A earns $50,000/year and partner B works part-time outside the home or not at all, such that his efforts at home help to free up partner A's time so she can devote her attention to competing successfully within the job marketplace, the partners' respective contributions in terms of hours may be the same. If it is similar on a fairness scale, then is it really appropriate that partner A should be solely entitled to a $10,000 savings account she accumulated during the cohabitation when partner B worked only in the home and so did not have access to the dollar wages that could be tucked away?

You don't need to agree with this philosophical analysis, although it is the modern view, but perhaps these examples make it clear that cohabitation agreements include moral, ethical, and fairness considerations which deserve attention. These can be negotiated and compromised in an even handed manner that is respectful of and sensitive to the dignity and relative contribution of both cohabitants. Truly, if two partners enter a relationship where the underlying assumption is that only the partner who works for wages is bringing value into it, this is not an auspicious beginning.

Protecting Assets and Income of Both Parties

Many people who utilize cohabitation agreements have previously been married and divorced, and have ongoing responsibilities for children or aging parents. They cannot afford the economic consequences of another break up and they want the companionship and benefits of a committed relationship.

In many cases the partners may have substantially equal assets and liabilities, or their relative net worths may not be too disproportionate. Two-earner households are more common today than ever before.

In California persons who cohabit who are not married or who are not domestic partners have no rights or obligations between themselves under the Family Code, assuming they have no children together. Their rights or obligations, if any, are determined solely by contract - and if there is no written contract it becomes very difficult to determine what people intended at the time they acquired what they acquired or did what they did. All kinds of claims can be made about verbal promises, and verbal agreements are enforceable when a Judge believes they exist.

Unmarried partners who have not been protected by a written agreement have no right to claim an interest in the other partner's property accumulated during the relationship, and they have no inheritance or survivorship rights absent an existing will or trust. Common law marriage is not recognized in California, unless it was first established in another state which does recognize it.

There are very good reasons to carefully draft and execute cohabitation agreements beyond trying to exclude the other partner from making a claim if the cohabitation ceases. It may be helpful to create a template for how the relationship can be disentangled in an orderly and equitable manner once it ends; however, it can be very useful to have a roadmap about how certain activities should be handled even in an intact relationship. Knowing one's rights in advance and having a formula for confirming them is always a smart thing which can positively affect decision-making.


Creating Nonmarital Partnerships

Just as a cohabitation agreement can be designed to protect against creating unintended rights in the other partner, so too it can be positively used to create protections that would otherwise not exist under the law. These are generally called "pooling agreements" or "Marvin Agreements".

If you create a business partnership or joint venture you do it with the expectation of generating profits, including the coequal sharing of an increase in the value of the partnership and whatever money is spun off and distributed from the partnership. Some people wish to do the same thing with their nonmarital cohabitation partnerships.

Is it any more wise to enter into a nonmarital cohabitation without any form of agreement than it is to enter a business partnership on a handshake? In these times lawyers must shake our heads in dismay when people proudly tell us that their word is their bond and that they make their deals on a handshake. While such sentiment is admirable, it is not realistic.

A cohabitation agreement can be used to specify what property and assets becomes joint and under what circumstances, what the proportionate joint interests are, what to do with debt, and what property is to become or remain separate as to one partner alone. It can be used to protect the partners in the event of death as to property that may be jointly owned but not jointly titled. It can create a structure for valuing and dividing assets that avoids litigation and high legal fees, not to mention hostility and resentment, upon termination of the joint living arrangement.

It can also be used to create certain rights and obligations of support under specified settings.


Cohab Agreements Are Wise to Consider

Whether family attorneys counsel a particular client to utilize a cohabitation agreement, as with prenuptial or premarital agreements, often depends upon who has - or who over time is anticipated to have - the larger economic power and financial resources in the relationship.

The obvious situation is where the economically better off person wants the security of the protections. The common assumption is that the person with wealth should always insist upon a cohab agreement, and that view is probably correct - the agreement, however, can become something much larger and more creative than simple property waivers.

Ironically, people with some degree of economic advantage often don't avail themselves of a cohabitation agreement because they feel embarrassed, uneasy, or frightened to ask the other about it, on the belief the other partner may be offended. In my experience people are only offended when the agreement runs in one direction.

If a woman with zero assets and little income seeks advice about how to structure her economic relationship with the man or woman she is about to move in with, a cohabitation agreement may or may not be in her best interest depending upon the terms. It may come as a surprise, however, to learn that she will probably be far better off in all situations with one than without.

If one participant in a joint living arrangement is obsessed with acquiring and keeping all of the marbles, you are headed for trouble anyway. For me it is always best to admit that there is an elephant in the room. By placing these concerns on the table there is a huge potential freedom to address them in ways which are ignored when there is no agreement. People can be guided into thinking about consequences they otherwise block out of their minds. This can nurture a positive beginning, rather than a beginning by default with neither person is talking about a multitude of what-if's. It provides an opportunity to honor both persons, and is not at all mutually exclusive with reasonable legal protections.

People rarely seek marital counseling outside the church or education before marrying. Similarly they rarely give much thought to how to structure their lives when they undertake living together outside of marriage.

Cohabitation agreements provide an amazing opportunity to consciously and mindfully embark upon a new relationship.

If you intend to share a household with a romantic partner other than only temporarily, my recommendation is that you always consider entering into a cohabitation agreement. However, it is important that you locate counsel in your area who is not merely a traditional adversarial lawyer, because their resource toolbox for assisting you with all your issues tends to be relatively empty.

For more advice and recommendations before you cohabit, visit us here!

Thurman W. Arnold III

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