In preparation for this article, I had a little fun Googling the phrase, “shacking up” just to see whether it’s still in use, or whether that was just an old fashioned term that has fallen by the wayside. Well, guess what? The phrase is just as common today as ever. And apparently so is shacking up! In my last article, I mentioned that sometimes couples live together without getting married for a myriad of reason. Some call it a test drive, while others have a more financially-based reason for their living arrangements.
Shacking up definitely has estate planning connotations. Specifically, in states like Texas where common law marriage is recognized, at what point does your partner have a potential claim to your estate? Texas recognizes common law marriage, so you could be at risk of having your partner claim a spouse’s interest in your estate in the event of death. Other legal claims based in contract and reliance can arise as well. Basically, in the absence of a clear understanding and written agreement between the parties, you leave yourself wide open to all kinds of claims just because cohabitation creates a blurry, undefined circumstance.
For example, your roommate could always make a claim against your estate, saying something along these lines: “Bob promised me that if I moved in with him, took care of him, played house with him, had sex with him, and enjoyed life with him, then he would leave me everything.” Or, your roommate could claim that he or she spent all of their money on your household expenses (or even claim an ownership interest in some portion of the house) “as a loan” and that he or she is are entitled to repayment. The list of potential claims is as endless as your roommate’s imagination.
If you want to avoid any confusion and protect your estate from any claims of infiltration by your “it-may-work-out, it-may-not” roommate, consider a cohabitation agreement. It’s similar to a prenuptial agreement, which is a document signed by couples prior to their marriage spelling out their intentions with regard to their property after their marriage. Just as with the prenup, a cohabitation agreement spells out the parties’ agreement vis’-a-vis’ the property they each own or co-own together, with the only difference being that they aren’t actually married. The typical cohabitation agreement provides at least for the following, although additional issues are included in a comprehensive agreement:
1. The reasons for entering into the agreement;
2. The date the parties began living together and brief history of their relationship.
3. A list of all property owned by both parties. Without this detail, the agreement could later be set aside (i.e., declared invalid) on the grounds that one party did not make full disclosure to the other;
4. How are living expenses to be paid; whether a joint bank account will be established; who owns newly-acquired items; who pays for repairs; will payments for maintenance and improvements to one partner’s property create an ownership interest or be treated as a loan or gift?
5. If one partner is supporting the other, what is that partner receiving in return? And how long is the support to continue?
6. How do the parties revise the agreement if circumstances change?
7. Termination of the relationship;
8. Upon death, does the surviving partner receive anything? Who is responsible for the deceased partners’ debts? Are there other beneficiaries?
9. How are disputes resolved?
10. Does the agreement continue if they later marry?
Coupled with a trust agreement, which establishes a “holding tank” for the separate property of one of the partners, a cohabitation agreement warrants serious consideration. It may seem awkward to plan for death or separation often in the early stages of a relationship, but if you are willing to address these issues up front, many of the problems arising from the death of one of the partners can be avoided.
For more information on estate planning and other legal needs, or if you have a legal question you would like for me to address, please visit my website at www.leflerlegal.com, email me at firstname.lastname@example.org, or call me at 512-863-5658. My office is located in Tamiro Plaza, 501 South Austin Avenue, Suite 1320, in Georgetown, Texas.