Cohabitation Agreements Defined
An Indiana cohabitation agreement is a written and signed agreement between you and your boyfriend or girlfriend. You must not be married to each other, and neither of you can be married to anyone else. An example of a cohabitation agreement is two people who have lived together for several years in a committed relationship, and decide that they want to share certain expenditures they will have together, and also want to protect their assets from each other should one of them die before the other. The agreement might include a plan for the sale of the home if the relationship does not end up in marriage.
The basic purpose of a cohabitation agreement is to provide legal guidance and clarity about your plans and intentions . If there are any legal questions, this written document can help to clear up those potential issues.
It does not matter whether or not you intend to marry. The fact that you are not married yet is what makes a cohabitation agreement possible. If you are married, that is when you need a prenuptial agreement or a postnuptial agreement.
Cohabitation agreements are different from prenuptial and postnuptial agreements because those documents only come into play once there is a legal marriage in place. Since cohabitation is not marriage, a cohabitation agreement takes the place of a prenuptial agreement. It does much the same thing; however, since you are not legally married yet, a cohabitation agreement can include more specific details about the relationship and the plans you have.
Advantages of Cohabitation Agreements in Indiana
State legislators understood the legal issues facing unmarried couples living together and addressed many of them through the use of cohabitation agreements. Such agreements establish how property and finances are handled during a relationship in addition to addressing division of property, assets and debts in the event of a breakup.
Some of the many benefits of creating and having such an agreement include:
Being able to make decisions or arrangements for personal matters, such as funerals and medical decisions, is important when it comes to your partner. These types of decisions are often made through a spouse, so unmarried couples should take the time to write in such details into their cohabitation agreements. They have the option to decide if they want their partner involved in these types of discussions with the ability to designate others if desired when a doctor or hospital needs input on such matters.
Perhaps one of the greatest benefits is the ability to enforce these agreements through Indiana courts while making them legally binding and enforceable as well. Some states do not recognize cohabitation agreements due to their common law laws and opinions regarding unmarried couples. However, cohabitation agreements provide a balance of rights for both parties in Indiana while protecting individual assets.
Essential Elements of a Cohabitation Agreement
While every party’s situation is different, there are certainly key components that will be found in most cohabitation agreements. Some of the more common include:
Financial Arrangements
To be fully enforceable and in compliance with Indiana law, an agreement must address what will occur in regard to financial matters at the time of the separation, as well as during the relationship. For example, agreements often address:
Property Rights
Cohabitation agreements also frequently lay out property rights as they pertain to what each party would receive upon a termination.
Responsibilities
Finally, a well-written cohabitation agreement will address issues such as:
While laying down basic guidelines for settling any issues that arise during or after the relationship, a cohabitation agreement should still allow for some flexibility. If nothing else, it should state that the parties recognize the need to evolve the agreement as circumstances change.
Indiana Legal Requirements
In Indiana, there are no specific legal requirements regarding whether a cohabitation agreement must be in writing or whether a person must be an attorney to draft one. Instead, the Indiana Code places requirements on agreements with respect to alimony waivers. These requirements govern portions or categories of a written agreement (specifically, a waiver or property settlement agreement) relating to spousal or child support.
IC 31-15-2-12 contains the requirements for a valid waiver of alimony provisions by a party to a marriage. Subsections (a) through (d) list the requirements for a legally enforceable alimony waiver. Within the subsection, "the waiver must be made knowingly, intelligently, and voluntarily." A written agreement, such as a cohabitation agreement, which is entered into between two parties who are not married will be enforced by courts if the essential terms in it are fully satisfied, meaning all legal requirements of the agreement are met.
The other provision of the Indiana Code pertaining to any written agreement of a marriage, within IC 31-15-2-13(a) (3), relates to child support, welfare reimbursement, and liability of a parent to support a child.
"To be valid, an agreement must:
- (1) In a writing signed by the parties;
- (2) Include a disclaimer that the agreement is not in settlement of a claim for dissolution or legal separation of the marriage;
- (3) Disclose whether either party will have the right to seek court approval of a modification of the agreement with regard to child support or spousal maintenance."
If any of the conditions are not met, the waiver is void. Courts have used the statutory language outlined even when the parties are not formally recognized as being married, because if any of the above provisions were not satisfied then the agreement is void.
How to Draft a Cohabitation Agreement
An initial step may be to discuss the Agreement with your live-in partner and see if there is agreement on the important terms. As is often the case, a little bit of "give and take" on both parts may be necessary to reach an Agreement that is satisfactory to both parties.
It is also a good idea not to move too quickly. It is wise to spend a reasonable amount of time discussing the elements of the Agreement and deciding what specific terms are important to you. This will allow you time to prepare mentally (and financially, if necessary) for the Agreement you are about to enter into.
At this stage, it may be helpful to create a list of key "terms" that you feel are necessary for your Agreement. Once the list is drafted, sit down with your partner in a neutral setting (in a comfortable environment where the negotiation can occur without interruptions) to discuss the potential terms . Once discussed, draft a letter noting what the important terms are, along with what person gets which item/property/asset. This will allow you to keep track of all important items, and eliminate missed details.
The return of the Cohabitation Agreement is certainly not the end of the discussion. To complete the Agreement, each party’s attorney must have the opportunity to read the document and make certain that its terms are appropriate under Indiana law, and that you understand the Agreement and will be bound by it.
While the Agreement-making process can take time, it is better to take the time to reach a complete Agreement and get it just right, than it is to speed through and make a mistake that may cost you later in the event the relationship ends.
Common Myths
The most common misconception is that a written agreement is needed to establish the property and financial obligations between you and your partner if/when your relationship ends. Indiana Code Section 31-11-3-2 recognizes a nonmarital cohabitation relationship and provides that any contract between the parties shall not be invalid in this state on the basis that the parties are living together in a nonmarital cohabitation relationship. In other words, if you don’t have a written agreement, any verbal or implied agreement you have with your partner regarding property and financial issues will be enforceable under Indiana law.
Another misconception is that such a contract is only needed when the parties intend to separate. In fact, many cohabitation agreements include provisions for the relationship during its existence such as the sharing of household chores, who can entertain guests and when, pet custody, etc. These types of "house rules" are typically not enforceable as a court of law, but offer the parties transparency and a system for resolving future disputes.
Clients often assume that no contract is needed because the parties agree to divide their property if they separate. This is a misconception. To be enforceable, any contract to divide property has to be made in writing. Although many relationships end amicably and the parties agree to divide their property or provide support to the other at the end of their relationship, an enforceable written agreement is the only way to ensure those rights are protected. A contract can establish a period of financial support to the other that will be required if the relationship ends.
Another misconception is that an agreement is binding upon all other parties. Cohabitation agreements only bind the parties to the contract. For example, even if an existing home is clearly owned by one party, if the relationship ends and the home is not divided pursuant to a contract, the other party cannot be excluded from living there until the house is sold unless a court order is entered. Contracts between parties do not affect third party/third party rights. With respect to home mortgage lenders, they are obligated to protect lien holders and the co-signor is typically jointly and severally responsible for the mortgage and property expenses. This is true even if the parties have a written cohabitation agreement to the contrary.
Amending or Terminating a Cohabitation Agreement
Modifying or terminating a cohabitation agreement may become necessary as the circumstances of the couple change over time. This could be due to an increase or decrease in income, a significant change in expenses, or even the birth of a child. The process for modifying or terminating a cohabitation agreement generally revolves around the original agreement itself.
If there is a specific clause or section within the original agreement stating how the agreement can be modified or terminated, then that should be the process followed. Most often, however, the original agreement will not address this issue. Instead, the original agreement may simply state that it can be modified or terminated by mutual written consent. Assuming this is the case, the parties would need to draft a new document that outlines the terms of the modification or termination and have both parties sign it formally .
It’s critical to understand that, under the same legal principles that make premarital agreements valid and enforceable in Indiana, a court may be "more likely to inquire into the fairness of [cohabitation] agreements[.]" As such, since the agreement must be entered into voluntarily, knowingly, and with independent knowledge, both parties should take time and care when modifying or terminating the agreement as well. In sum, if one party drafts the agreement without conferring with the other and does not allow sufficient time to review the document prior to signing, a court may be hesitant to enforce the agreement, even if the terms that the parties themselves are happy with.
This does not mean that modifying or terminating an agreement must be a complicated process, especially if both parties are agreeable to the changes. It is simply meant to emphasize the importance of having the agreement properly drafted to protect each party.