Living Together Agreements for Unmarried and Same Sex Couples
Money Matters Radio – Estate Planning Q&A with Gary Goldberg
By: Martin M. Shenkman, Esq.
How do unmarried couples that don’t want to marry or same sex couples protect their interests? What happens to their assets if they break up? What if they have adopted children and their relationship ends? Let’s leave aside issues that are state specific and focus on general planning.
Married couples are afforded a host of protections under every state’s laws. There are detailed rules governing distribution of assets on death, and large bodies of law determining how assets are divided in the event of a divorce. But little of this law exists for unmarried or gay couples. How do they protect themselves?
An important step for most non-married couples is to carefully prepare and sign a “living together agreement.” This should be done by opposite sex couples that simply want to live together before marriage, by opposite sex couples that want to live together to see if they want to get married, and by same sex couples that may or may not take advantage in the future of a civil union or gay marriage statute.
What exactly is a living together agreement and how should the couple go about it?
It’s a legal contract that sets forth the rights and obligations of each of the parties during the relationship, governs what happens if the relationship ends, and should also specify what happens if the couple opts to marry or join in a civil union or register as a domestic partnership. Each party should have his or her own lawyer and treat the matter seriously and give it much thought. That does not mean it has to be adversarial or even a negative experience. The process can be controlled by the couple to avoid that. Properly done, it can actually enhance the relationship by assuring that each partner has a really detailed understanding of the other partner’s views on a host of critical issues. Mishandled, it can be a combative force that could undermine the relationship.
What items should be considered in a living together agreement?
The list is really endless and depends on the lifestyle, goals, and concerns of the couple. The more items that are intelligently and reasonably addressed in the agreement, the fewer items can exist to fight about if the relationship comes to an end. That being said, the scope of the agreement can vary considerably, and may in fact change over the duration of the relationship. Consider the following:
- The agreement for many non-married couples might focus on just their house. Many living together agreements are completed prior to an unmarried couple purchasing a home together. This type of agreement will address who will own the home, perhaps who will pay what expenses, what should happen if the person who is to pay a particular expense does not do so, who gets the house or what should be done with it if the relationship ends, who gets the contents of the house, and more. While addressing primarily a home is a good starting point, and a fairly common approach, it lacks the detail of an integrated and comprehensive agreement. What happens if you agree to share expenses, but one partner becomes ill or looses his or her job? As you expand the scope of the “house” questions, it can evolve into a comprehensive agreement.
- Determine the nature and scope of personal or relationship provisions, and whether or not they should even be documented. Will one of you provide for the care of the house and manage the household finances while the other works? While some of these issues could be critical to address as they might be the foundation of the financial arrangements, exercise caution in crafting provisions that a court can’t or won’t enforce.
- How should property owned prior to the partnership beginning be identified? How should it be treated? If you own a beach house before the partnership began, and it is agreed that if the relationship ends, the beach house remains yours, does that agreement apply to the furniture? What about the art work? What if your partner renovates the beach house or if all of the maintenance expenses and property taxes are paid from a joint account that is funded with earnings from each of you? Should an adjustment be made?
- How should expenses be covered? Will you each retain a separate checking account, deposit your separate earnings into that account, and pay your portion of bills? Alternatively, would it be simpler to have a single checking account for all deposits and bill paying? Which ever approach you opt for, how should that account be divided if the relationship ends? Should disparities in expense payment be equalized? Is sharing expenses equally fair or agreeable? If you earn double your partner, should you cover 2/3 of each expense and he or she cover the remaining 1/3? Sharing in proportion to earnings may be viewed as more reasonable or fair that equal sharing of costs.
- What happens if one partner is disabled? Will that change the overall agreement? It will unquestionably change the economic contributions each partner will be able to make to the relationship. How should that be handled?
- What about estate planning and documents? Should you each agree to leave at least certain assets to the other? This is not only a legal and personal decision. It should be a financial decision as well. If your partner dies and leaves you his or her half interest in the home you lived in, will you be able to afford the payments without the contribution of your partner’s salary? If not, consider life insurance or alternative planning arrangements.
- How should disagreements be handled? It might be advantageous to include a dispute resolution mechanism in the living together agreement. Perhaps mediation before an agreed upon group could be mandated. This might prove simpler, less costly and far less adversarial than litigation.