When I was 25 and in love, I didn’t think twice about asking my partner to move into my house. It turns out my cohabitation experience was far from unique. Since 1995, the share of cohabitating adults — or unmarried couples living together — has increased from 3% to 7%, according to a 2019 Pew Research report.
Moving in together may seem like the perfect way to save money — until something goes wrong. One of you could lose a job, become temporarily or permanently disabled, or suddenly decide to end the relationship. After my breakup, it wasn’t easy to unwind a decade of living together. Without a cohabitation agreement or lease in place, the process was even more challenging.
Marriage comes with many legal protections, like co-owning the property you buy together. In most states, you can divide co-owned property when you get divorced. But cohabitation doesn’t offer the same level of protection, says Dennis E. Sawan, managing partner of Sawan & Sawan in Toledo, Ohio.
If you’re ready to move in with your partner, you need to talk about the financial logistics. Once you iron out the details, consider protecting yourselves with a cohabitation agreement. We’ll cover why this type of agreement is so important — and how to get one.
Disclaimer: This article does not constitute legal advice and is not a substitute for obtaining legal advice from a qualified attorney.
Marriage vs. Cohabitation: What’s the Difference?
When you’re young and in love, living together — and saving money in the process — may seem like an easy decision. According to the same 2019 Pew Research report, 38% of couples say their finances motivated them to move in together. While there’s nothing wrong with splitting the rent and utilities, it’s important to understand the risks of cohabitation.
Make no mistake: By law, there is a big difference between cohabitation and marriage. Without marriage, you have no legal rights or obligations to each other. Some of these rights and obligations may include — but aren’t limited to — property distribution, financial support, and inheritance rights.
“Marriage is a process of law, where two people’s lives merge together,” says Steven Fernandez, principal owner and managing partner of Fernandez & Karney in Los Angeles, California. “In many states, there are no express legal benefits for couples who cohabitate.”
Cohabitation is generally more unstable than marriage, which means you could wind up in a more vulnerable financial spot if the relationship were to end. Signing a cohabitation agreement is one way couples can address this lack of protection. Here’s what you need to know about them.
What is a Cohabitation Agreement?
A cohabitation agreement is a legally binding contract that protects unmarried people who live together. The exact terms of a cohabitation agreement may vary, depending on each couple’s unique needs.
There may be different names for the contract, says Sawan. He says it’s common to see professionals refer to them as cohabitation agreements, non-marital contracts, or living together contracts.
“It’s essentially a private contract that states how the couple’s split will unfold,” says Fernandez. He says a cohabitation agreement could be critical during a breakup — or if one person becomes disabled or dies unexpectedly. Without one, there may be no legal roadmap to navigate these difficult scenarios.
What Does a Cohabitation Agreement Cover?
Every cohabitation agreement looks different. It may include everything from the custody of your children or pets to shared property. And the exact terms may range from general to specific, depending on your needs.
A cohabitation agreement usually includes a couple’s assets and debts, says Fernandez. The agreement outlines how to split up the property if someone dies, becomes disabled, or if the couple breaks up. The agreement can be general or dictate how to divide property, down to every single asset, he says.
Who Can Benefit from a Cohabitation Agreement?
Any unmarried couple that lives together may benefit from a cohabitation agreement.
Once you choose to live together, you’ll likely begin spending money together, too. You may split the cost of household supplies, dishware, or appliances. Or you may start to chip in for bigger things, like a fancy new mattress or sofa. The more stuff you buy together, the tougher it may be to divvy up without an agreement in place.
If you want to buy a home together while unmarried — which people are increasingly willing to consider, — there may be some added challenges to consider.
Fernandez says cohabitating couples may function a lot like married couples. He says cohabitating couples may buy property and get into debt together. But when a partner dies or the couple splits up, there’s nothing in place to help them navigate the best way to split everything.
“That’s where a cohabitation agreement can help,” he says. “Embrace the discussion and take the opportunity to prepare for the unknown. A little bit of stress now can make things a lot easier down the line.”
How to Set Up a Cohabitation Agreement
Before getting started, Sawan suggests talking openly to your partner about your lives together. This may include your current and future property. If you were to break up, how would you prefer to divide everything? If you can’t easily split something — like a home, for example — would you agree to sell it and share the profits?
Sawan says it’s common to see a piece of property owned by one person — but jointly paid for during the relationship. He suggests paying close attention to property like this that isn’t jointly owned. When a property has the title “joint tenancy with rights of survivorship,” it passes automatically to a survivor when the other owner dies.
But if you own property alone and die without a will, it will go through your state’s probate process. In this scenario, the property may not go to your unmarried partner — whether you like it or not.
The same goes for the beneficiaries on your savings account, 401(k), or other financial accounts. By updating the beneficiary, these accounts may transfer on death to whomever you choose.
While it’s possible to draft a cohabitation agreement on your own, Fernandez says it’s always better to work with a professional. “It’s best to turn to a lawyer for help because they can make sure the agreement is legally binding and covers all pertinent information,” he says.
Sawan says you may also benefit from working with an objective third party throughout the process of drafting the agreement.
How Much Does a Cohabitation Agreement Cost?
When you’re ready to create a cohabitation agreement, there may be one thing standing in your way: the cost. No matter how you slice it, working with an estate planning attorney isn’t cheap.
There are many factors that may impact the cost of your cohabitation agreement. Fernandez says these may include the complexity of the agreement. It also depends on the scope of your assets. Where you live may also have an impact.
The biggest factor will be how long the agreement takes to prepare, though. He says if the cohabitation agreement is pretty straightforward, you can expect to pay anywhere from a few hundred to a few thousand dollars.
Fernandez says the best way to save money is by working out the details before meeting with an attorney. “Get on the same page and move forward as a united force. The less time an attorney has to dedicate to the document, the less expensive the process is likely to be,” he says.
While every agreement will be different, you may want to address some of these questions before meeting with an attorney:
- Are you both currently capable of self-support?
- What happens if one partner becomes unemployed or disabled?
- How will you split household expenses?
- Do you own any property together?
- Do you have any joint bank accounts?
- Do you have any joint debt?
- How will you finance joint expenses in the future?
- How will you keep track of gifts to one another?
- Who will leave the home if you break up?
- What is the timeline for moving, and who pays for the expenses?
What Can Happen Without a Cohabitation Agreement?
When you’re uncomfortable talking to your partner, it’s all too easy to gloss over the big, important conversations. I learned this can be a costly mistake — after it was too late.
My partner and I decided to call it quits after over 10 years of living together. We never signed a cohabitation agreement or even a lease. This made things complicated when it was finally time to part ways.
Although I bought the property alone, we split the cost of several major repairs. We talked about co-owning the home together — if we could somehow get even on all my upfront expenses. But unfortunately, we broke up before making any decisions.
Luckily, we kept excellent records of our joint expenses while living together. While it wasn’t required by Tennessee law, I agreed to reimburse him $11,000 for what he contributed to the home. Then we both signed a separation agreement. The contract covered when he would move out and when I would pay him. Our breakup was mostly amicable, but things could have been a lot worse.
For example, without the right property title, you may have no legal rights to a property. This could be a huge problem if you chipped in a bunch of money to buy a home. But a cohabitation agreement — covering exactly how much each partner owns — could help protect you from future problems.
The Bottom Line: Start Talking to Your Partner Early
It may be tough to start talking with your partner about worst-case scenarios. But you shouldn’t be afraid to discuss cohabitation agreements. Starting the conversation may be the most difficult part.
“Like a pre-nuptial agreement, cohabitation agreements can be difficult to discuss,” Sawan says. The sooner you begin to talk, the easier it may be to iron out all the important details.
