As the national divorce rate for new marriages hovers around 50%, couples living together before marriage or in lieu of marriage is an increasingly routine arrangement. Media coverage has played a part by confirming what many people knew anecdotally: that people are choosing to live together as a committed couple without ever getting married.
What is also increasing in frequency and necessity is for cohabitating couples to be proactive in laying the legal groundwork for how they plan to live together, acquire or pay for assets, and how they should disentangle themselves from such arrangements in the event that they break-up. It can be a difficult conversation to have – no less difficult than one party asking the other for a pre-nuptial agreement – and the introduction of real world considerations may burst the romantic bubble for some, but the risks are real and people’s lives change – the boyfriend with a steady paycheck has gone back to school and is unable to pay half the mortgage; your girlfriend can not afford her to contribute to household expenses when she loses her job; you have a child together.
The ease of cohabitation without the apparent messiness or seemingly permanence of marriage can actually create a larger quagmire of difficulty if the relationship ends. If you are considering cohabitating with your partner, there are a few things worth considering:
1. Common Law Marriage in Pennsylvania. There isn’t any, at least any more. As we’ve discussed on this blog in the past, common law marriage in Pennsylvania was abolished by case law in 2003 and by statute in 2005. A common law marriage that pre-dates the 2005 law may be recognized by the courts, but “playing at house” in Pennsylvania after the 2005 effective date of the law will not result in the assumption that there is marital property or martial value in assets.
2. Cohabitation Agreement. Consider having a cohabitation agreement drawn up. We are seeing more couples requesting cohabitation agreements than ever before. “Cohabitation agreement” is a catch-all phrase for a contract between two people as to how they are going to set up their finances and economic life together when they begin living together. Unlike a prenuptial agreement which has the actual marriage as the triggering event for the agreement to be in effect, a cohabitation agreement will carry the hallmarks of a contract: an offer and acceptance of terms; consideration for performance of the terms. Unlike a prenuptial agreement which would be viewed in the context of a divorce in the Family Court, if you needed to enforce a cohabitation agreement it would be done by in Civil Court.
For married same-sex couples, a cohabitation agreement may be a worthwhile document to draft if you were legally married in another state and move into Pennsylvania. Pennsylvania may not recognize a pre-nuptial agreement which uses marriage as a condition of the agreement, nor will Pennsylvania’s courts recognize the same-sex marriage from another state; by entering into a cohabitation agreement, same-sex couple may at least be able to address their property rights in Pennsylvania without having to relocate to another state just to establish residency and seek a divorce. Until same-sex marriages are afforded the same full faith and credit among all of the states, a cohabitation agreement may insulate couples from finding themselves in a situation in which they can not clearly separate and divide their economic lives from each other.
3. Deeds and Titles. Title property appropriately. There are a variety of ways to title property and how it is done can significantly impact parties’ rights to that property. A jointly titled checking account may assume that all monies deposited are “equally” owned. If the parties specified a right of survivorship or titled the asset in a way that reflects their intent, then whether it is a break-up or one party pre-deceasing the other, the passage of the asset to the owner will be clean and unambiguous.
Legal ownership in assets also means legal liabilities should be considered, too. When someone decides to bear the cost of purchasing an asset, there should not be any ambiguity as to how it is paid for between the couple if they break-up. How that asset is legally titled will determine who has responsibility for the continued payment or liability for the asset. If it is only titled in one person’s name, then they may considerable difficulty securing contribution from the other.
4. Taxes. Find and use an accountant. Can you claim your partner as a dependent? Are there child care costs that can be claimed for your child? Unmarried couples can not file in the (usually) most tax advantaged designation of “married, filing jointly,” but an accountant can help you maximize your credits, deductions, and exemptions, particularly if you have children together and especially if one party earns considerably less income than the other.
In the second installment, we will cover issues related medical insurance, beneficiary rights, emergency contacts, and "the break up."