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Why You Probably Need A Cohabitation Agreement When You Move In With a Partner

John and Cat had been dating for several months when John got a job offer he couldn’t refuse that required him to relocate about 4 hours away to Austin. The job came with 3 months in corporate housing, which allowed them to commute back and forth while Cat helped John pack up and sell his place in Dallas.

Having recently left her full-time job in order to try her hand at freelancing, Cat decided she’d rather be with John, so she also sold most of her stuff and they found a place together in Austin. Because she’d left her network behind and was starting from scratch to a certain extent, John picked up most of the bills while she got on her feet professionally, eventually finding a new job at a local firm.

It seemed silly to track who paid for the almond milk and who bought the chicken, so they opened a joint checking account to make it easier for shared expenses. And when John's old Nissan finally bit the dust and he bought a new one, Cat chipped in to help him pay cash for the car they now shared.

But after two years, things started to fall apart and when Cat and John decided to break up they realized that splitting up was going to be muuuuuch more complicated than packing some boxes and getting out of a lease. Who owned the car? What about the credit card bills that John had paid when Cat was underemployed? What about the dog they got together?

Un-married but partnered folks: You probably need a cohabitation agreement.

(Think of it like a prenup for unmarried people.)

Do you need a cohabitation agreement?

As more and more couples choose to live together without going through the formality of getting married, a new term has cropped up in the legal world: the cohabitation agreement.

Similar to a prenuptial agreement, the cohabitation agreement is a legal document that both partners sign clarifying things like how bills will be paid and other logistics of the relationship, along with the division of any assets and custody of any children should the relationship end. Many couples who move in together do so as a sort of test to their compatibility — before taking the legal plunge into marriage, they want to make sure they can actually live together peacefully.

I can relate. My first marriage went down in flames for reasons that I would absolutely have discovered had we lived together first. So I knew that I’d be cohabitating with any future prospective husband before he put a ring on it. These situations don’t always call for a cohabitation agreement, but some couples may still choose to have one just in case the experiment fails.

Couples who, for whatever reason, decide to forgo marriage altogether and simply make a life together may choose to sign a cohabitation agreement in order to provide a level of protection should things turn sour down the road or one partner passes away. Each state’s divorce laws provide this protection when a legal marriage exists. The cohabitation agreement serves as sort of a replacement for this protection.

You really need a cohabitation agreement if you’re making a big financial investment together

Let’s say a couple purchases a home together then breaks up. If they were married, the judge presiding over their divorce case would see that the home was fairly split between them according to their state’s laws. 

When there is no marital law to apply, it can lead to costly legal battles even if the home was jointly owned. A cohabitation agreement helps to clarify and hopefully avoid such battles by stating ahead of time what would happen to the home should the couple split up or one person die.

Cohabitation agreements also served as a sort of prenuptial agreement for same sex couples before they were legally allowed to marry, but there are still instances where a same sex couple who is married may need the protection of a cohabitation agreement or similar document: for example, when they have a child in a state that doesn’t allow adoption by same sex parents. 

I have friends who had to consider this when each of them gave birth to a daughter from the same sperm donor, making their daughters half-sisters with different mothers who are married to each other. One of the reasons they chose to live where they do is that their state of residence allowed the other mom to adopt her non-biological daughter so that if something happens to the biological mom, there would be no concerns about the surviving mom retaining custody of both girls.

What your cohabitation agreement should cover:

  • Distribution of property (both individually and jointly owned ) should you break up or one person die. For couples with large income and/or wealth disparities, this can help avoid conflicts during and after the relationship about who pays what and who gets what.

  • Financial support during or after the relationship. For example, many romantic partnerships are forged out of business partnerships or vice versa. This can get very messy should the relationship end, so a cohabitation agreement provides a level of clarity and protection for both parties in that case.

  • Support, custody, etc of minor children. Family courts can override these agreements if it’s in the best interest of the child, but having an agreement ahead of time can provide peace of mind, especially if the child is not a biological child of both partners.

  • Health insurance responsibility. Many employers allow coverage of domestic partners, so a breakup could lead to loss of coverage for one of the partners.

Wills and powers of attorney can be used to cover most of these topics in the case of death, so cohabitating partners should still take those steps as well. In fact, it could be even more important to establish an estate plan when you’re NOT married as your partner may not be entitled to anything should you pass. Don’t rely on your parents’ or siblings’ generosity to take care of your partner should you pass unexpectedly - if it’s in a will or trust, then it’s set in legal stone.

I should also note: There are mixed opinions in the legal community about the enforceability of cohabitation agreements. This article is not meant to serve as a substitute for paid legal advice from an attorney. Should you decide that you and your partner need a cohabitation agreement, I strongly recommend you hire an attorney to draft it to maximize its effectiveness should you need it down the road.

Do you want 1:1 help navigating finances with your partner? I’ve had coaching clients tell me that our work together saved their relationship! My coaching is expert-level, and - other than my coaching fee - I don’t make any money off your financial decisions. So you know it’s 100% unbiased! Learn more here


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