1. Enter into a cohabitation agreement before moving in together

You can enter into this agreement any time during your relationship, but it is usually a good idea to agree on and sign it before you and your partner move in together.

Use the document to address how you’ll separate property if you break up but also how you'll share expenses during the relationship.

2. Be clear about why you need a cohabitation agreement

Cohabitation agreements are certainly not required for every couple who chooses to live together. People who enter these agreements may do so for any number of reasons, including any or all of the following:

• To reduce living expenses.
• Because their state doesn't recognize same-sex unions.
• To properly compensate one party who is taking care of the home and give the needed financial support to run the household.
• To protect one or both parties' substantial assets or property.
• To protect one party’s significantly higher income or assets.
• Because the couple will live in a home owned by one of them.
• One or both parties expect to receive substantial assets during the relationship from a settlement, inheritance, court award, or gift.
• One or both parties have significant debts.

3. Understand the difference between a cohabitation and a prenuptial agreement

A cohabitation agreement isn't the same as a prenuptial agreement. A prenuptial agreement is a contract that people enter into before getting married that continues throughout the marriage and becomes effective if and when the marriage ends.

On the other hand, a cohabitation agreement is signed between unmarried individuals when they enter into domestic partnerships and want to make the relationship official through a legal contract. However, a cohabitation agreement becomes invalid when the couple gets married.

4. Know the requirements to create a separate cohabitation property agreement

There are issues that can't be addressed completely in cohabitation agreements. You may need to create and sign additional documents to ensure your property and debts are maintained and distributed according to your wishes. In such cases, you must create a separate cohabitation property agreement.

For example, post-death distributions should be addressed in a last-will or living trust, and healthcare issues may require a living will or power of attorney. Because unmarried couples won't receive the same automatic protections that married partners receive. Hence, it’s essential to ensure that these documents are properly created and signed to record your preferences and protect your rights.

5. Examine the entire agreement before signing

Both parties should review the completed agreement carefully to ensure that all relevant deal points have been included.

6. Keep the signed copies

The involved partners need to sign two sets of cohabitation agreements. One copy is kept by one partner, and the second one is retained by the other partner.

7. Prove the validity of the agreement

Depending on the nature of its terms, you may decide to have your agreement witnessed or notarized. This will limit later challenges to the validity of a party’s signature.

8. Take legal help

If your cohabitation agreement is confusing and complicated, it is better to seek legal advice. An attorney can help you understand the legal requirements of your agreement. The legal counsel can also help you draft a document that'll meet your specific needs.

Key clauses included in cohabitation agreements

The following instructions will help you understand the terms of your agreement.

1. Introduction

Start the cohabitation agreement by introducing the parties involved in the agreement. You can address them as “party one,” and “party two.” You also need to provide the effective date on which the agreement is to be signed.

2. Recitals

This section, referred to as recitals, offers key background information about the parties. Mention the key details of your relationship, like:

• Whether the partners are already living together or want to live together in the near future.
• If they have any children together and need child support. You must include the names and birth dates of the children, too.

3. Property

This part details the property ownership you and your companion have for a property. It contains all the general property rights. If you and your partner want to make separate agreements about a particular piece or type of property, you can do so.

Following is a list of things that are considered as property.

(a) Separate property: It states that any property that either party owns before the agreement is signed will remain that person’s personal property. In other words, one party doesn’t have any claim on a piece of property owned by the other before they start living together.

To make this clear, each party is given the ability to list all of their personal property separately. This can include things like real estate, household furnishings, furniture, appliances, jewelry, antiques, vehicles, bank accounts, life insurance, equipment, stocks, bonds, retirement plans, or other assets.

It isn't mandatory to list every spoon and knickknack on this list, but it’s a good idea to include most large ticket items so both parties know their property rights.

(b) Income: In this section, the parties agree that any income either of them earns after the effective date will be shared. You can include exceptions to this rule. For e.g., any income earned from personal property will remain the property of that individual.

It also provides the provision to keep any future income separate.

(c) Gifts: Explains that gifts that either person receives will remain the property of the person who received them.

(d) Inheritance: It states that any money, property, or specific assets received by one party as part of an inheritance will remain their separate property.

(e) Winnings: Any money earned through gambling or the lottery (or similar sources) will be considered separate property of the person who won it.

(f) Awards and settlements: Income received as part of a lawsuit settlement will be the property of the person who received it.

(g) Insurance proceeds: Insurance settlements or payouts will be the property of the person receiving it.

(h) Shared property: This part states that the jointly owned property of the parties shall remain shared property. You and your partner can mention what those are in this section.

(i) Separation: If you and the other party split up, this subsection explains how any jointly owned property will be divided. During separation, the cohabiting couples can either share the property in half, where each party will receive 50% (or the monetary equivalent), or each person will receive the amount they contributed to the purchase of the property.

For example, if you put in 70% of the money to buy stocks together, you’ll receive the equivalent of 70% of those stocks.

(j) Household expenses: This section outlines your agreement about who'll pay how much for the day-to-day living costs. These can be:

• You and your partner split the costs 50-50.
• You'll split the costs according to how much you earn. In other words, if you earn 70% of the household income, you'll support payments for 70% of the household expenses.
• You can designate a specific percentage of the expenses to be paid by each party (which doesn’t have to be equal or in proportion to how much either of you makes).

(k) Exchanges between parties: A cohabitation agreement doesn’t stop the parties from exchanging or transferring ownership of property.

However, if you want to do this, you should ensure there’s written evidence of this transfer. Obviously, this may not be necessary for every minor item you give to one another. But for larger ticket items (e.g., cars, houses, etc.), you should make sure there is evidence that ownership rights are being given. Without written evidence, it may be difficult to prove that one or the other of you clearly owns it.

4. Pets

This clause determines how animals will be cared for if the unmarried couples own pets and they stop living together. According to this, one person can take ownership and responsibility for the pets, or the parties can split custody, visitation, and expenses according to the agreed-upon terms. Provide any visitation schedule or other agreements you and your partner have.

5. Debts

This part details the obligations of each party for separate and shared debts.

(a) Separate debts: This explains that any debts that either party owed before the date of the agreement will remain that person’s personal debt. In other words, the party that didn’t create the debt won’t have to pay for it if the relationship ends. All debts incurred before the cohabitation are separate (e.g., educational loans or job training loans).

However, for joint debts (i.e., debts that the two of you incurred together before you started living together), the parties must pay off together.

(b) Debts from separate property: States that any debts that are created by or that came about because of a party’s separate property remain the responsibility of the owner of that property. For example, if you own a piece of real estate and take out a mortgage on that property after you start living together, the mortgage payments are your responsibility. Your partner won't be responsible for that debt.

(c) Separation: If you and your partner break up, this subsection explains how your shared debts will be divided. You and your partner can split the obligations 50-50, regardless of who borrowed what. Or the debt will be divided in proportion with the initial division of borrowing. In other words, if one borrowed 70% of a debt, they'll be responsible for paying back 70%.

6. Children

(a) Names of children: Lists the names, birth dates, and places of birth of the parties’ children. Enter the names of the children you and your partner have.

(b) Obligation of support: It states that both parties have an obligation to raise and support their children. If the parties separate, they agree that this obligation will continue according to law. Provide the name of the state whose laws will control the parties’ financial obligations and maintenance requirements. This will generally be the state in which all of you live.

(c) Best interests of the children: Herein, the parties agree that the best interests of their children are the most significant factor in determining questions about their upbringing or support. If a court later finds that anything in this agreement isn't in the best interests of a child, this subsection allows the court to revise the agreement.

7. Estates and testamentary disposition

Your estate is everything you own at the time of your death. In other words, after your death, all of your possessions (and all of your debts) form your “estate.” A testamentary disposition is how your property is distributed according to your will.

(a) No restrictions on distribution: It states that regardless of what is said in the cohabitation agreement, neither party is required to leave all or any part of its property to the other party. Of course, either party is entitled to leave as much or as little to the other as they choose.

(b) Named beneficiary: This section allows either party to make the other a beneficiary (i.e., person receiving property) in their will or any other document transferring property after their death.

(c) Waiver of inheritance rights: This subsection waives each party’s rights to get an automatic share of the other’s property under certain state laws. Again, this doesn't mean the parties can’t receive the other’s property under a will or a trust. It simply means that they aren’t entitled to an automatic distribution outside of those documents.

8. Additional terms

An optional provision allowing the parties to include any other provisions particular to their situation. For example, if you want to include a distribution of household chores, you can feel free to detail that arrangement here. If you do include something like that, you should be aware that this may not be something that'll stand up in court.

9. Representations and warranties

This section details the parties’ promises under the agreement. One party’s promises serve as an incentive for the other to enter into the agreement.

More specifically, each party is promising that:

• neither of them are married;
• they’re not married to each other (or married to each other under the parameters of “common law marriage”);
• they’re both entering the agreement because they want to and not because the other partner is forcing them to;
• they both had the chance to talk to a lawyer before entering the agreement. This doesn’t mean that either party actually did talk to a lawyer, just that they both had the opportunity to do so; and
• they haven’t entered any other contract related to the rights and responsibilities detailed in the cohabitation agreement.

10. Termination

This part explains that certain actions or events will end the agreement. If one person simply wants to end the arrangement, they can do this by providing written notice. Provide the notice period one party must give of its intent to terminate the arrangement.

The cohabitation agreement terminates automatically if the parties get married. At that point, the state’s rules about marriage, partnerships, and the property rights related to them will govern your relationship.

11. Other documents

It states that the parties promise to sign any additional documents or contracts if those become necessary to complete the agreement or to make the agreement effective. For example, if the parties want to make an agreement about the distribution of a specific asset, they agree to work together to draft and sign it.

12. Successors and assigns

This part indicates that the parties’ rights and obligations will be passed on to heirs or other people who have been assigned those rights. For example, the rights to certain property will be transferred to the people named in someone’s will.

13. Modification

Indicates that any changes to the document are ineffective unless they're in writing and signed by both parties.

14. No implied waiver

This section explains that if either party allows the other to ignore or break an obligation under the agreement, it doesn't mean that the party waives any future rights to require the other to fulfill those (or any other) obligations.

15. Governing law

This part allows the parties to choose the state laws that will be used to interpret the document.

16. Counterparts; electronic signatures

This section asks the parties to sign the agreement if they agree to the terms of the cohabitation.

17. Severability

This clause protects the terms of the cohabitation agreement as a whole, even if one part is later invalidated. For example, if a state law is passed prohibiting choice-of-law clauses (i.e., the sentence in which you pick the state law that'll govern your agreement), it won't undo the entire document. Instead, only the section dealing with the choice of law would be invalidated, leaving the remainder of the agreement enforceable.

18. Entire agreement

It states that the parties’ agreement that the document they’re signing is “the agreement” about the issues involved.

19. Headings

This section mentions that the headings at the beginning of each section are meant to organize the document. Any interpretation of the agreement shouldn't be based on the headings.

Frequently asked questions

What's a cohabitation agreement?

When you decide to make a home with your significant other, moving in together can yield as many moments of stress as joy. If you aren't legally married, one way to help both of you feel more secure is with a cohabitation agreement. This document outlines financial responsibilities and protects each person's property if the relationship ends.

What essential information is required to complete your cohabitation agreement?

The following information is required to complete your cohabitation agreement:

• Who the cohabiting couples are: Keep the names of the partners ready
• Details of the children: Include the name and date of birth of the children, if any
• How to divide expenses: Consider how household expenses and bills will be divided
• If there's any shared property: Provide the property details shared with the partner
• If there's any shared debt: Give the details of the shared debt
• Whether there are pets: Know how custody would work if you split up