Wealth Planning

Make a Cohabitation Agreement, Prenup or Postnup Work for You

February 6, 2024

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Aspiriant News



Make a Cohabitation Agreement, Prenup or Postnup Work for You

A long, long time ago, a young couple graduated college, moved across the country and got their first apartment together. They weren’t making much money, so they happily shared costs as they bought things for their home. A new vacuum cleaner. A luggage set. Dishes. For two years they lived together harmoniously until they weren’t. They evolved but their relationship did not and they knew it was time to part ways. But the arguments over who got what were epic. And in that moment, they both vowed to have something – anything – in place to protect their sanity and financial assets if they were to ever live with someone again before marriage. Because the older and more successful someone gets, the higher the financial stakes.

The cohabitation agreement

According to a Pew Research Center study on marriage and cohabitation in the United States, most adults 18 to 44 have cohabited at some point in their lives. In fact, the study found the vast majority of Americans think cohabitation is acceptable even without plans to marry. Whether marriage is on the table or not before moving in together, there are key discussions to have so you can avoid disputes, suggests this NPR podcast and article. The Aspiriant team is passionate about emphasizing the importance of having money conversations. In fact, we have dedicated an entire podcast called Money Tales to demonstrate how to engage in productive discussions about money.

One helpful way to protect all parties living together is a cohabitation agreement. If you’re wondering what is a cohabitation agreement, you are not alone. It may not be as well-known as its more famous cousin, the prenup agreement, but a cohabitation agreement offers a practical solution to protect individuals who are sharing their lives together for any duration.

What is a cohabitation agreement?

A cohabitation agreement is a legally binding contract intended for unmarried couples, roommates or family members who live together. These legal documents essentially help identify each party’s property and outline what will happen to assets if the relationship ends. A cohabitation agreement can also be used to explicitly state that the couple is not establishing any form of common-law marriage by living together.

Cohabitation agreement template and requirements

A cohabitation agreement template provides a framework for discussing and documenting property ownership, financial responsibilities and other key aspects of living together. (Think how you will divvy up bills, whose name is on the lease and who covers the vet bills for pets you acquire together.) If your financial situation is more complex, it’s best for each person to have separate legal counsel to help you negotiate your terms. To ensure the agreement is legally enforceable, it must meet specific criteria:

  • The agreement must be in writing and signed voluntarily by both parties. (It’s advisable to sign it before moving in together to resolve any conflicts early.)
  • There must be fair and reasonable disclosure of each person’s property and financial obligations.

As more individuals opt to live together before marriage, the popularity of cohabitation agreements is likely to increase. Even roommates are becoming savvier in establishing such agreements, as pointed out in this Apartmentguide post. As these agreements become more mainstream and less stigmatized, perhaps there will be a natural progression from discussing cohabitation agreements to prenup agreements as a relationship moves toward marriage.

What is a prenup?

And now you may be asking, “But what is a prenup?” A prenup agreement, short for prenuptial agreement, is a legally binding contract executed before marriage that serves to override the default property division laws. It is a crucial document for safeguarding your assets and clarifying financial expectations. Melissa Punim, our director in Strategic Planning and a partner, assures her clients who are ready to walk down the aisle that a prenup can have a real value to building a good marriage, no matter who has what or how much. It’s a, “practical way for spouses to list assets and define roles in the marriage.”

Can’t decide if a prenup is truly necessary in your situation? Melissa also shares tips for when a prenuptial agreement is strongly recommended. These circumstances can include when children from a prior relationship are involved, there is a family business or there are large amounts of debt.

A great resource on a real-life prenup story is shared in our Money Tales podcast featuring Lindsay Hardie, PhD. In her journey with her now husband, she revealed that during the prenup discussions with the attorney’s, she took into consideration that her income earning potential would be on pause while she had their children. She also shared how, over time, their prenup has evolved into more of their estate planning and is a collaborative process.

Following the interview, co-host and Chief Client Officer and partner, Sandi Bragar, Certified Financial Planner®, provided a recap to help debunk the myth that prenups are created when a couple does not expect the marriage to last. “A premarital agreement, especially if it’s entered into with the right intention and timeframe, can be a helpful tool to support a thriving relationship, rather than an escape hatch for dismantling it.”

Postnup vs. prenup

While prenuptial agreements are executed before marriage, postnuptial agreements – commonly called a postnup – are signed after the marriage has taken place. In the debate of postnup vs. prenup, keep in mind that both serve the same primary purpose, which is to override default property laws and protect each spouse’s interests. However, they differ in the timing of execution, as SmartAsset explains.

In the case of postnuptial agreements, these documents are drafted and agreed upon after the marriage has occurred. They offer a similar level of protection as prenuptial agreements but can be especially useful for couples who may not have considered a prenup agreement before their wedding.

If you believe that a cohabitation agreement, prenuptial agreement or postnuptial agreement might be suitable for you, here are a few ways you can get in touch with us. Existing clients should reach out to their Aspiriant client service team, who can assist with any additional questions and guide you through the contracting drafting process. As your relationship progresses and financial stakes become more complex, clear and effective communication are essential in safeguarding your financial future.

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