Unmarried couples sign “cohabitation agreements”

Many couples aren’t waiting for the bonds of matrimony before entering another legal partnership with monumental responsibilities – the home mortgage.

According to Zillow, 15 percent of unmarried couples between the ages of 24 and 35 are purchasing homes together, up from 11 percent in 2005.

Generally burdened with lots of debt, but armed with two solid incomes, the idea is to get into the home market as soon as possible.

To be sure, co-ownership is a good way to soften the financial blow.

But a whole new set of problems can arise when couples break up. Many do. One or both parties are still going to be liable for the mortgage payments

Unlike marriage and divorce, there is no legal process for dividing shared assets in a breakup. One solution is what’s referred to as a “co-habitation agreement.” Like a marital “pre-nup” it protects a person’s assets when a relationship ends.

Many unmarried couples draft these legal documents with the help of an attorney.

Chances are, the parties won’t want to live together after the relationship ends. The agreement lays out who gets to stay and who bears any future financial responsibility.

Married couples are generally bound by a state’s matrimonial laws: In most states, that means a 50-50 split regardless of who paid what.

Unmarried owners have a bit more flexibility. As “Tenants in Common,” the share of the property each owns can be written into the contract.

Parties may agree to place certain values on contributions to improvements or other changing circumstances. It may also stipulate that the home be sold and how any proceeds will be divided.

Couples wishing to avoid this situation can choose to put only one person’s name on the title. If there is no marriage, all financial responsibility and claim reverts to him or her.

Usually, after a couple ties the knot, the cohabitation agreement is no longer enforceable, unless it was created shortly before the marriage in the anticipation of marriage. That’s a whole new set of legal issues.

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