A prenuptial agreement is a legal agreement created by a couple intending to get married. The agreement spells out how existing property would be divided in the event the couple ever gets divorced. When the couple marries, the agreement goes into effect. Sounds pretty straightforward.
Sometimes, however, couples cohabitate without ever choosing to get married. They mingle their assets, live together and, for all intents and purposes, are married. They just never make it legal. What they don?t realize is that if they choose to separate they may find themselves embroiled in an expensive legal battle over who has the rights to existing assets.
Couples who plan to live together long-term may wish to create a cohabitation agreement. This is a formal agreement that allows the couple to spell out how they want property brought into the relationship to be divided. You can think of it as a prenuptial agreement for non-married couples. The agreement can cover division of assets that are accumulated while the couple are together. For instance, one partner may use a bonus from work to buy an expensive piece of art. The partner might assume that since she bought it with money she earned, the art is rightly hers in the event of separation. The other partner might believe he is entitled to at least half its value since they kept a shared bank account and never differentiated between who used what money to buy items.
A cohabitation agreement can discuss how property brought into the partnership should be divided, what would happen to money or gifts acquired through inheritance and even how expenses incurred through the separation process will be handled. Since property laws differ greatly from state to state, it is critical to consult an attorney to help ensure the wishes of each party can be legally enforced and properly carried out.
Rather like writing a will, it?s easy to view creating a cohabitation agreement as a morbid or negative activity. In reality, however, it?s a way for partners to show that they love and respect each other and that, even if the unthinkable occurs and they go their separate ways, they want to ensure that both parties are provided for.