What is a Cohabitation Agreement?
Cohabitation agreements are contracts between unmarried people. Two individuals who are living together, and not legally married, enter into a contract specifying their rights and obligations with respect to the property, debts and other important issues that relate to their arrangement.
The cohabitation agreement is not the same as a marriage contract. Such agreements have been around in Virginia since the state’s very first incorporation. Cohabitation agreements, on the other hand, have only been around for about the past 10 years or so. The concept behind such an agreement is that unmarried couples can protect their rights just as married people do. With many people marrying later in life , the need for cohabitation agreements is becoming more and more popular.
Because of a generally higher level of wealth among those who marry at a later age, many unmarried couples have substantial wealth that they want to protect. The cohabitation agreement sets forth the terms, rights and obligations of the partners before the relationship ends up in court. In most cases, the agreement is designed to avoid unnecessary and expensive litigation. Cohabitation agreements may include terms regarding bank accounts, pension plans, investments, personal property and other matters directly relating to finances.
Benefits a Cohabitation Agreement Can Provide
A cohabitation agreement provides primary legal benefits related to financial issues, such as assets, debt, and support, that may arise for an unmarried couple living together. Such benefits include:
Asset Protection
While married couples are afforded certain spousal rights and equitable distribution laws in divorce, unmarried couples are not. When crafting a cohabitation agreement, you can choose how assets and property title are held between the partners; you may decide that one partner will own the residence while the other pays for it. Virginia law generally provides that once a property is in an individual name, absent a written agreement, the property is presumed to belong to the individual holding title, regardless of financial contributions. You can also choose how to divide and distribute assets acquired during the relationship, and how debts such as student loans and credit card debt are paid.
Financial Responsibilities
While not legally required, keeping your finances separate can be smart for peace of mind and protection in the event of a split or break-up. Couples should determine how to pay joint bills and expenses under the terms of the agreement. Bank accounts can remain separate or one of the partners can be designated as the debtor for a particular expense. This is especially important if one of the cohabitating partners has bad credit. Allowing that partner to be on the hook for credit card payments can have an impact on his/her ability to pay the debts. For example, if you were to get married, your spouse’s bad credit scores would impact your joint credit scores. Detailing these terms in the agreement will lead to less confusion later in the relationship.
Personal Property Rights
You may want to specifically outline personal property possessions in the cohabitation agreement, or choose to class certain items as joint or communal property, such as furniture, pets, and vehicles, or the category of "non-marital gift or inheritance." After all, some personal property rights are automatically protected by Virginia law without being defined in a cohabitation agreement. For example, under Virginia law, personal property gifted to one partner by a third party during the relationship is the property of the partner receiving the gift.
Support
In Virginia, as well as most other states, there are no legal duties among cohabitating partners to provide living expenses or support to one another. Virginia courts do not award alimony to unmarried couples, so support will be covered in a cohabitation agreement. You can choose to include issues such as financial support, life insurance proceeds, healthcare, and child visitation in the agreement. Just like any marriage, once a cohabitating relationship ends, support is often the most litigated item and can be pricey. Cohabitation agreements in Virginia should ideally address how support will be calculated.
Medical Decisions
In the event that one of the partners becomes incapacitated and unable to make medical decisions, several Virginia statutes address who has legal authority to make decisions on behalf of the person under medical care. Under these laws, a certified surrogate can act in certain medical situations because individuals not authorized to make healthcare decisions may seek to prioritize their own needs and desires over the needs and desires of the patient. Medical decisions for an incapacitated person can include a person’s choices regarding artificial nutrition and hydration and organ donation.
Cohabitation agreements in Virginia are becoming more popular and are now recommended by many family law attorneys to individuals irrespective of whether they are in a heterosexual or homosexual relationship. Cohabitation agreements are an opportunity for couples to define expectations and understandings from the beginning of the relationship. Having all the groundwork laid out at the outset provides a much easier process when the relationship does not work out – and many times, it’s a far sight better than fighting over the same issues in family court.
How to Prepare a Cohabitation Agreement in Virginia
Creating a lawful cohabitation agreement in Virginia is a straightforward process, but you should follow a set of steps in order for the contract to hold up in court. These steps ensure that the agreement expresses both parties’ needs, and that it outlines all of their agreements for cohabitation and beyond.
Follow these steps to create a valid cohabitation agreement in Virginia:
1. Seek a family law expert
First, find an experienced family law attorney to assist with drafting your cohabitation agreement. You will want to get legal counsel to create a contract that protects you both, even if your arrangement seems uncomplicated. An attorney will also be able to recommend appropriate steps to enforce the agreement, if necessary.
2. Discuss agreement details
After hiring an attorney, the first meeting will involve a thorough discussion of the important details of the relationship. It is vital that both parties are honest and forthright, so your attorney can draft the most strongly constructed agreement possible.
Some things to consider during the discussions include:
- Whether either party will retain any real estate property
- Whether any assets have been exchanged
- What events would be cause for the agreement to end
- How this agreement will affect any other contracts in place between the two people
- Create agreement
Once the details have all been discussed and agreed upon, the attorney will draft the document. Both parties should then read it thoroughly, and be sure to voice any concerns before the document is officially signed.
4. Sign agreement
Finally, it’s time to sign the cohabitation agreement. Be sure to sign the contract before witnesses, and keep a copy in a safe place. Remember, the agreement cannot be enforced until it is signed by both parties.
A valid cohabitation agreement will protect both parties in the event of a split. If a couple decides to part ways, a cohabitation agreement has the power to eliminate the need for a lengthy legal battle for property division, spousal support and child support. it will also help protect them in the event of a physical separation.
Your cohabitation agreement may also outline how to handle a joint bank account or other funds, which is important for providing basic living expenses if one person moves out.
Hiring an experienced family law attorney is crucial for ensuring that your cohabitation agreement is enforceable in the state of Virginia.
Essential Elements of a Cohabitation Agreement
In Virginia, key components of a comprehensive cohabitation agreement include a mutually agreeable plan to divide real and personal property in the event that the relationship or the agreement terminates. Such a plan includes provisions for the division of tangible and financial assets. If the partners have children, they can develop a voluntary child custody and visitation plan, including provisions for medical care, schooling, religious observance and the division of child-rearing expenses.
These agreements can also define the division of debts, financial commitments to each other and to third parties, and how to handle the joint filing of income tax returns.
The agreements may contain a provision for how a potential dissolution of the partnership would be handled, including whether the partners could obtain relief through mediation or arbitration, or whether they would use the court system to dissolve the agreement. They may also enumerate disputes in which partners agree to seek mediation and/or arbitration prior to filing suit, and establish a nonrefundable retainer to cover mediators’, arbitrators’ and attorneys’ fees.
An important aspect is the requirements for a legally binding cohabitation agreement. Although Virginia’s Domestic Relations chapter does not specifically address the enforceability of a cohabitation agreement or enforceability requirements, Virginia courts have found that such agreements are enforceable so long as they meet the underlying contract requirements for contract formation.
Thus, cohabiting partners in Virginia need to establish that the cohabitation agreement was signed voluntarily and contains an element of consideration. The default consideration in such an agreement is one partner’s promise to do or omit an act in exchange for the other partner’s promises.
To that end, Virginia courts have held that a valid cohabitation contract may arise from a promise to marry or to provide support, when that promise is not enforceable under another law. Courts have also held that mutual promises to render services to the other party may be sufficient consideration for an agreement. In that regard, the consideration element of a contract does not have to flow from the party seeking the contract’s enforcement.
Nor do cohabitation contracts have to be in writing in Virginia, although such a written contract may be the best evidence of mutual agreement. Virginia common law contains two doctrines that concern contracts not being in writing: the common law Statute of Frauds and the equitable doctrine of part performance. Under the common law Statute of Frauds, a promise not to be performed within a year must be in writing or it is unenforceable. This argument would therefore be used by the party seeking to invalidate the agreement. Under the doctrine of part performance, a cohabitant unable to afford representation due to a lack of assets but who nevertheless provides services and/or property to the other party may rely on the doctrine to avoid an argument that the agreement is invalid because it was not in writing.
Myths about Cohabitation Agreements
Our clients are often surprised and a bit relieved to learn that we are able to draft enforceable agreements to protect rights among unmarried couples. Over the years, we have encountered many misconceptions about these types of agreements, each of which can be easily explained.
One of the most common misconceptions is that the agreement has no legal standing. While Virginia law is not as comprehensive as was the Uniform Premarital Agreement Act (UPAA), its analog at the time. In 2013, the Virginia General Assembly adopted the Uniform Premarital and Marital Agreements Act (UPMAA), which applies primarily to marriage. However, there is much in the UPMAA that is illuminating to those drafting agreements among unmarried couples. The comment to §20-155.1 specifically states that that it is not meant to govern agreements among fault courts and that common law decisions will continue to work in this arena.
Another common misconception is that these agreements are not necessary because the couple has not made a long-term commitment. While caution is appropriate, the fact is that many long-term committed couples do not marry and rely instead upon agreements among contract law. The number of committed and long-term relationships of 10 years or more that are not legally married is significant. Additionally, some people regard premarital agreements as inappropriate because of the sadness that comes when break-ups occur after a long-term relationship. It is the manner of disposal of the asset of a long-term relationship that needs the protection of an agreement. In other words , the address of the upscale condo is just as available to both parties’ friends as is the non-marital cohabitating relationship. This is important especially when the relationship begins to deteriorate.
We also often hear anecdotal arguments that such a focus on money should not govern the decision to marry. The decision to marry should be made with an understanding of the expectations of the marrying couple that together they will be successful economically. One of the proven steps toward a healthy marriage is an elucidation of mutual expectations. Understanding the financial ramifications of the decision helps a couple make reasoned choices if the voluntary relationship fails to proceed to marriage.
It is very common for both parties to make lifestyle concessions and sacrifices so that two corporate careers can be successfully maintained, often at the expense of one or both spouses’ individual lifestyle expectations when the marriage began. Thus, agreements that allocate what is otherwise a marital asset (as with a marital agreement) are simply enforcing the status quo ante and are not as radical as some may believe.
For contemporary couples where such alternative arrangements have become exceedingly common, the allocation of assets may even be considered a necessity, in part to facilitate the necessary turnover of jobs or other status changes that are often required of high-achieving corporate professionals. It is one thing to achieve success as a corporate lawyer or banker alone, but it is another matter to have the active support of a successful spouse or partner in the same arena as the core of the professional’s career. Thus, wealth and property are not as important as they were to couples married in the past, leading to an emphasis on professional sacrifice to the relationship rather than the protection of the family finances.
We often help clients navigate the discussion of why these agreements may be appropriate to their situation. Such discussions usually illustrate that notwithstanding that the parties may have ample wealth and intellect, differences of opinion about the future of the property they have accumulated make having such agreements seem appropriate.
How to Enforce a Cohabitation Agreement
Once a cohabitation agreement is entered into, either party may file for enforcement if the other is not living up to the terms of the agreement. However, many cohabitation agreements prohibit using a breach as a basis for enforcement, and instead may only provide for a breach under specific circumstances. Courts in Virginia will enforce such agreements when they are not in conflict with public policy.
The Supreme Court of Virginia has held that cohabitation agreements between two or more unmarried persons can be enforced if the parties have signed the contract as long as it is not illegal and not against public policy. Hall v. Hall, 57 Va. (11 Gratt.) 653 (1861). Importantly, the court further clarified that contracts which are prohibited or against public policy — including agreements between parties not to support children born out of wedlock — will not be enforced. Id.
Under Virginia law, cohabitation contracts are governed by the rules of contract interpretation. Under Virginia law, the primary principle of contractual construction is that a validly executed contract should be enforced according to its terms. Evans v. Evans, 96 Va. 474 (1898). The intention of the parties — in view of the circumstances surrounding the agreement — shall be regarded to effectuate the reasonable meaning of their language, that is, according to the ordinary and usual signification of the words employed. Id.
Generally, contracts which are formed for illegal purposes (including unlawful sexual relations) will not be enforced by courts. However, there are some exceptions to this general rule. The Supreme Court of Virginia has held that an unlawful purpose will not be declared by the court if "the illegal object is sufficiently independent and separable from the substantial lawful purpose." Blackwelders of Virginia v. Landmark Communications, 212 Va. 885 (1972). Therefore, cohabitation agreements may be enforceable where the illegal object is sufficiently independent and separable from the substantial lawful purpose. In addition, contracts formed on the promise of sexual relations are unenforceable in Virginia. Brown v. McClanahan, 64 Va. 859 (1888).
When You Need a Cohabitation Agreement
Consider the following examples of when a cohabitation agreement may be helpful for you and your partner. While writing this list, I thought of all the significant life circumstances and financial matters when cohabitation agreements can protect you from future litigation.
Retirement or Windfalls: Examples include an inheritance, a worker’s compensation settlement, an injury settlement or a lump-sum payment from a divorce called a property settlement. If you have been injured and you expect to receive a lump-sum settlement in the future, then you should consider getting a cohabitation agreement to protect your settlement. Also, if you own a business and you receive a portion of the business proceeds as a property settlement from a divorce, then you should consider getting a cohabitation agreement to protect your property from your new partner. Virginia Courts do not recognize common law marriages any longer, but you as a couple could make a contract to share property and stuff should you break up. You should buy that contract through an attorney and make sure not to sign boilerplate language that your attorney offers. You should also make sure that you are working with an experienced attorney when setting up your cohabitation agreement.
You Own a Business: If you own a business, you should consider whether a cohabitation agreement would be helpful . If you would like to protect the business or business interests for yourself, you can use a cohabitation agreement to keep your assets separate in the event of the end of your relationship and breakup. If you depend on your business for income, then it may be even more important to protect this income stream for when you may need it or want to preserve it for yourself. This could also protect your spouse against creditors if you own a business and your business is sued. If you have children and you are not married yet otherwise live together, having a cohabitation agreement may be important to clarify issues of support when you separate and reduce the risk of misunderstandings or costly litigation when you break up. If you capitalize on a particular market or your job is at risk of being eliminated, then you will make even more money through your business and you will want to protect these funds for yourself. The court will divide your income stream from your business if you break up and you don’t have a cohabitation agreement that says otherwise.
You Play a Professional Sport: If you play a sport professionally, often the professional athletics do not recognize you as a marriage until you meet with an attorney to sign a prenup prior to your first game. If you have a professional endorsement or sponsorship, you should consider a cohabitation agreement.