In today’s housing market, more and more non-married couples are deciding to purchase homes together. Whether due to rising housing costs or the desire to build a shared future, co-owning property can be a rewarding but complex undertaking. Unlike married couples, non-married partners lack the legal protections and default rules provided by marriage. This makes it crucial for them to plan ahead, document agreements, and understand the implications of co-ownership. Below, we explore essential considerations, potential challenges, and strategies for non-married couples purchasing a home together.
Draft a Cohabitation or Property Ownership Agreement
A legally binding agreement is a cornerstone of co-ownership for non-married couples. This document can:
- Define each partner’s ownership percentage.
- Outline financial responsibilities, including mortgage payments, property taxes, insurance, and maintenance costs.
- Specify how decisions about selling or refinancing the property will be made.
- Detail a dispute resolution process in case the relationship ends or disagreements arise.
This agreement helps protect both parties and provides clarity in situations where emotions might complicate decision-making.
Address Estate Planning Considerations
Without a formal plan, the death of one partner can lead to unintended consequences for the surviving partner. Estate planning can ensure that your wishes are honored:
- Joint Tenancy with Right of Survivorship (JTWROS): If the property is held as joint tenants, the surviving owner automatically inherits the deceased partner’s share. This avoids probate but doesn’t account for other heirs who may feel entitled to a portion of the estate.
- Tenants in Common: This structure allows each partner to specify heirs for their share of the property. However, it can lead to complications if heirs decide to sell their portion or demand payment from the surviving partner.
- Wills and Trusts: A will or trust can clarify your intentions for the property and ensure that the surviving partner is protected. For maximum security, consider a living trust that bypasses probate and provides smoother property transitions.
Plan for Death and Heirship Issues
If one partner passes away without proper planning, heirs could legally claim the deceased partner’s share of the property. This can create financial and emotional stress for the surviving partner. To prevent disputes:
- Clearly specify property rights in estate documents.
- Purchase life insurance policies to cover the mortgage or buy out heirs if necessary.
- Establish a written agreement addressing how the property will be valued and divided in the event of one partner’s death.
Handle Mortgage and Income Disparities
Differences in income or credit scores can complicate mortgage arrangements. Here are some strategies to address these challenges:
- Co-Borrowing: Both partners can apply for the mortgage together, combining their income but also sharing equal liability.
- Single Borrower: If one partner has a stronger financial profile, they can apply for the mortgage alone. However, this may create tension if the other partner feels excluded.
- Fair Contribution Agreements: Document how mortgage payments and down payments will be divided. For example, if one partner contributes a larger share, the agreement can reflect a proportional ownership split.
Paying Bills and Managing Ongoing Expenses
Non-married couples should also agree on how they will handle day-to-day expenses related to the property. Common approaches include:
- Setting up a joint account for housing-related expenses.
- Splitting costs proportionally based on income or ownership percentage.
- Keeping a detailed record of contributions to avoid disputes later.
What Happens if You Break Up?
While it’s hard to imagine the end of a relationship at the beginning of a home purchase, planning for this possibility is essential. The cohabitation agreement should address:
- Whether one partner can buy out the other’s share.
- The timeline and process for selling the property.
- How to handle shared equity and closing costs.
Seek Professional Guidance
Co-owning property as a non-married couple requires careful legal, financial, and estate planning. Consulting with professionals—such as real estate attorneys, financial advisors, and estate planning experts—can provide peace of mind and protect your investment.
Conclusion
Purchasing a home as a non-married couple is a significant milestone that comes with unique challenges. By taking the time to create clear agreements, plan for the future, and address potential risks, you can build a stable foundation for your shared home and relationship. Thoughtful preparation today can prevent misunderstandings, disputes, and financial hardships down the road.
Contact Mauriah Conway, Esq. to assist you with all of your Estate Planning, Probate and Trust Administration Needs (916) 920-5983.
Disclaimer: This blog post is for informational purposes only and does not constitute legal advice. Please consult with a qualified attorney for guidance specific to your situation.