Cohabitation Agreements

For the last two centuries, marriage has been seen as the culmination of an emotional attachment to a member of the opposite sex. Yet marriage has always also had a material component as well. For most of recorded history, and probably before that, a wedding marked the union of property as well as people. Consequently, the end of marriage in divorce could affect the financial security of more people than just one couple and perhaps their children. Thus, causing that kind of instability within a community was something to be avoided whenever possible.

Pre-nuptial agreements, popularly known as pre-nups, were developed to avoid problems that might arise when one or both parties in a marriage decided to split. Pre-nups are not new. They’ve existed since biblical times. Ancient Hebrews used them to provide for women who went through widowhood or divorce and had no other means of support than their husbands. During our own lifetime they’ve made news when wealthy heirs and/or celebrities had their spouses sign them, signaling that even relations portrayed as the ultimate in romantic bliss in the popular press could come to an abrupt and unhappy end.

Now nuptial agreements are gaining in popularity.

Over the last 20 years changes in our laws and social mores have made pre-nuptial agreements even more useful – and therefore more popular – than they’ve been in the past. So much so that a new form of pre-nup – the Cohabitation Agreement or no-nup – has arisen to answer a need various social changes have created. These changes include the fact that people are waiting longer to marry than ever before although most people in their twenties and thirties still long for a long-term relationship with one partner. 

More couples are choosing cohabitation instead of marriage.

 Consequently, millennial couples – heterosexual as well as homosexual – are living together as couples before marriage in greater numbers.  According to a 2016 study from the Pew Research Center 18 million adult Americans live with an unmarried partner and half of this group are under 35 years old.

In an article for the New York Times, “The Rise of the Millennial Pre-Nup,” Susan Shain postulates this is because “Millennials are marrying later than previous generations, with years to build up assets and debt on their own.” They are also more likely to be aware of the perils of divorce from an early age since one third of them were raised by single or divorced parents.  Signing a legal agreement that defines the responsibilities of each party when there is a likelihood that one of them may be more financially solvent than the other is clearly a prudent thing to do.

These generational differences result in social changes.

 “Most of the millennials we have dealt with really consider it a business deal, so there’s very little emotion attached to it,” said Madeline Marzano-Lesnevich, president of the American Academy of Matrimonial Lawyers regarding pre-nups. “And that is certainly different” from previous generations. “I think it’s because they both want to protect their independence and what they’ve been working for,” she said.

As Louis Cannataro, partner and founder of Cannataro Park Avenue Financial observes about his own martial experience, “I got married at 23, so we put nothing and nothing together.” But now Cannataro, advises dozens of millennial clients on their pre-nups. “When someone’s getting married in their 30s, there’s a different approach.” The fact is – even without a wedding in their future, millennial couples are far more likely to consider signing a pre-nup or no-nup than their parents were.

Changing attitudes toward marriage aren’t restricted to millennials. 

Interestingly enough, the fastest-growing age group of American cohabiters are those who are 50 years old or older. Between 2007 and 2016, 75 % of couples in this demographic group opted to live together rather than to marry. Since most people in this age bracket have a significant amount of property and financial reserves, it only makes sense for them to try to preserve what they’ve earned for themselves and their heirs.

These evolving social mores have created a need for a new type of pre-nup – the no-nup.

In an article written by Charisse Jones for USA Today, Atlanta-based certified financial planner Niv Persaud is quoted on the importance of a no-nup. ”While more and more couples are living together and not marrying, it is important to discuss upfront your financial situation and what happens if one person becomes ill, leaves or dies, because you are not protected by the benefits of being legally married.”

CFP Debra Neiman who practices in Massachusetts agrees and adds that couples living together could also make their lives run more smoothly by, “writing the rules of engagement or paper… it can be as detailed as ‘Party A pays the electrical bill and Party B pays the gas, and the mortgage is 4split equally.”

What is a no-nup?

James Griffith, describing no-nups in Family Law Magazine writes, “a Cohabitation Agreement (commonly called a no-nup) provides protection from unnecessary costs and time spent in a courtroom should the relationship end. No-nups are helpful in identifying property rights, mutual financial support during the relationship or after a breakup, and childcare. They also can assign responsibility regarding debt following a breakup, as well as establish guardianship and the authority to make emergency medical decisions if one partner is incapacitated.”

“No-nups are also useful in outlining up front who will keep certain assets and what will happen to assets that were purchased during the relationship, should they choose to end it. The agreement binds both” 

What’s the difference between a pre-nup and no-nup?

Obviously, a pre-nup is used by married couples while those using a no-nup are not married.  But there is another significant difference. A pre-nup agreement alters the respective rights of each party under the family law code of a state. A no-nup, on the other hand, impacts the respective rights of each party under civil law and is not subject to the same restrictions as a pre-nup.

For example, if a prenuptial agreement is not presented to the other party at least seven days before it it’s signed, it is considered legally invalid in some states. The same applies if both parties of a pre-nup aren’t represented by attorneys. But these restrictions don’t apply if you’re seeking a valid cohabitation agreement.

What should be in a no-nup? 

A no-nup should spell out the financial responsibilities and benefits of cohabitation for each partner. The purpose isn’t to “protect” one party from another, but to ensure that the rights of both people are fully respected. Such an agreement can also clarify living arrangements during the course of the relationship such as who does certain chores and how much each is expected to contribute to the household expenses. The details are really up to the couple and can be developed together before they even consult an attorney.

Do you need a lawyer?

A Cohabitation Agreement is a legal document and should be drawn up by an attorney since it has to be written according to state law and local requirements. As a rule, cohabitation agreements can NOT cover child custody or support and any issues regarding the division of retirement or pension accounts. Yet a no-nup is still an excellent tool to make everyone in a relationship feel a bit more secure about their rights and finances now and in the future.

Avoiding problems by planning ahead is always a good idea. 

While hashing out a legal agreement before moving in with someone may seem to indicate a certain cynicism, it’s actually a good way to assure the success of a relationship.  Both people can begin by expressing what they expect of the other and their life together. Then they can work out practical ways to realize those expectations. They both can also feel more secure about not having to deal with unexpected arguments over who pays what.  Having such an agreement can also be reassuring to parents of younger couples and the adult children of older ones regarding bank accounts, investments and material goods that may involve the expectations of family members.

Vicki Adams, a financial planner from San Pedro, CA put it this way, “A no-nup is critical!  Before the first stick of furniture is moved in, draft an agreement specifying how property and money will be divided if the couple splits up, so whatever happens in the future will be easier.”

If you’d like to know how a pre-nuptial or no-nuptial agreement could help you and your partner or potential partner, contact me today!