What goes into a Cohabitation Agreement?
/A cohabitation agreement allows an unmarried couple to decide how their finances will work during their relationship and what happens if they separate.
Without an agreement, disputes between unmarried partners can become complicated. California law allows unmarried partners to make agreements about property and financial support, including agreements that may be written, oral, or implied from their conduct. A written cohabitation agreement provides clarity about what the couple actually intends rather than leaving a court to determine that later.
Every couple’s agreement will look different, but here are some of the most important issues to consider.
1. What Property Does Each Person Already Own?
The agreement should identify the property each person owns when the agreement is signed and confirm whether that property will remain separate.
This can include real estate, bank and investment accounts, retirement accounts, businesses, vehicles, and other significant assets. It is also helpful for each person to disclose their existing debts.
Starting with a clear financial picture makes it much easier to determine what belongs to each person later.
2. What Happens to Income Earned During the Relationship?
One of the biggest differences between marriage and cohabitation is that unmarried couples do not automatically have California’s community property system governing their earnings.
A cohabitation agreement can establish the couple’s own rules.
Will each person’s earnings remain their own? Will some or all income be deposited into joint accounts? Will money placed into a joint account become jointly owned? If the couple uses one person’s income to purchase an asset, who owns it?
There is no single right answer. The important thing is to decide what the couple intends.
3. How Will You Handle Joint Accounts and Household Expenses?
Couples should decide how they intend to pay their shared expenses.
For example, will each person contribute an equal amount to a joint account? Will contributions be proportional to income? Will one person pay certain expenses while the other pays others?
The agreement can also clarify whether money contributed to a joint account becomes jointly owned and what happens to any remaining balance if the relationship ends.
4. What Happens If You Buy a Home Together?
For many couples, this is the most important part of the agreement.
The agreement should address what happens if the partners contribute different amounts toward the down payment, mortgage, renovations, or other expenses.
For example, the couple can decide:
Whether ownership will always follow the percentages on title.
Whether either person receives their down payment back before the remaining equity is divided.
Whether mortgage principal payments create additional ownership rights.
How major improvements are treated.
How appreciation or losses are divided.
Whether one partner has the right to buy out the other.
How the property will be valued in a buyout.
What happens if neither person can or wants to keep the property.
Making these decisions when the property is purchased is considerably easier than trying to reconstruct the couple’s intentions years later.
5. What If One Person Owns the Home?
The agreement is also important when one partner moves into a home owned by the other.
If the non-owner contributes toward the mortgage, property taxes, renovations, or other expenses, the couple should specify what those payments mean.
Are they rent? A contribution toward household expenses? A gift? Will they be reimbursed? Do they create any ownership interest in the property?
The agreement can also address how long the non-owner can remain in the home after a separation and whether they are responsible for rent or other expenses during that period.
6. What Happens If One Person Stops Working or Reduces Their Income?
This is particularly important when a couple plans to have children.
One person may leave the workforce, work part time, or make other career decisions that allow the other partner to continue working.
The couple can decide whether those decisions create any financial rights or obligations between them. For example, will the working partner provide support if the relationship ends? If so, for how long and in what amount?
The couple can also expressly agree that neither person will owe the other financial support.
The important part is to address the issue rather than leaving the parties to disagree later about what was promised.
7. How Will You Handle a Business?
If either person owns a business, the agreement should address whether the other person’s involvement creates any financial or ownership rights.
This becomes particularly important when one partner works for the other’s business, contributes ideas or labor, invests money, or helps build the business without becoming a formal owner.
The agreement can specify whether those contributions are compensated employment, an investment, a gift, or something that creates an ownership interest.
8. What Happens If You Separate?
A good cohabitation agreement should have an exit plan.
That can include how joint accounts are divided, how jointly owned property is sold or transferred, how debts are allocated, who remains in the home temporarily, and how one person can buy out the other’s interest in jointly owned property.
The clearer the process is, the fewer decisions the couple has to make in the middle of a separation.
9. Can You Change the Agreement Later?
Yes, but the agreement should establish how changes are made.
Ideally, changes should be made in a written document signed by both partners. The agreement can also state that opening a joint account, changing a beneficiary designation, jointly filing taxes, or otherwise changing how the couple handles their finances does not by itself modify the cohabitation agreement.
This helps prevent a later disagreement about whether the couple informally changed their arrangement.
10. What Happens If You Get Married?
Marriage changes the legal rules governing the couple’s financial relationship.
A cohabitation agreement should therefore address what happens if the couple later marries. Couples who decide to marry should also consider a premarital agreement that addresses both the property they accumulated before marriage and how their finances will be treated after marriage.
11. What Happens If One Person Dies?
Separation is not the only event a cohabitation agreement should consider.
Unmarried partners do not have all of the same rights at death that spouses have. The agreement can address whether either partner has financial rights following the other’s death and should be coordinated with the couple’s estate planning.
For example, if the intention is for one partner to remain in a jointly occupied home after the other’s death, that intention should be reflected consistently in the cohabitation agreement, title to the property, and the parties’ estate planning documents.
12. How Will Disputes Be Resolved?
The agreement can establish a process for resolving disagreements.
For example, the couple can agree to attempt mediation before filing a lawsuit. Depending on the circumstances, they may also want to address attorney’s fees, arbitration, confidentiality, and other issues relating to a future dispute.