Living together complicates finances

On Behalf of | Dec 20, 2020 | Property Division |

The ongoing pandemic has contributed to the trend of unmarried couples choosing to live together. But non-married couples, like over half of all married spouses, end their relationships. Married and unmarried couples should take steps to protect their property or they may face some unpleasant surprises under Michigan’s family law and other statutes.

Cohabitation agreements

Couples who move in together should set forth their financial relationship in a written contract. Cohabitation agreements may be simple and address which person owns specific assets.

This gives couples the opportunity to prepare an agreement that meets their need if they ever breakup. Otherwise, a decision may be reached through stressful negotiations or imposed upon them under Michigan law by a judge or arbitrator.

Boilerplate forms or templates may not be effective Michigan law or may be invalidated because a person did not understand it or signed it under duress. Each person should have their own attorney represent them to assure that they knowingly and voluntarily signed a fair agreement.

Prenuptial agreements

After engagement and before marriage, couples may also execute a prenuptial agreement. These are generally more complex than cohabitation agreements and can also address financial arrangements, which spouse pays for certain expenses and receives tax credits, and property distribution if a spouse dies or the couple divorces. These contracts may also contain terms protecting the rights of child from an earlier marriage or relationship.

Postnuptial agreements

A postnuptial agreement addresses many of these issues and is executed after a couple marries if they never entered a prenuptial agreement or if their financial situation significantly changed, there is an inheritance, or a spouse establishes a business.

Having divergent assets can complicate property division in a divorce. If there is a growing gap in income and assets between the spouses, a postnuptial agreement may be advisable.

Home ownership

Many couples purchase a home before marriage. But a spouse may inadvertently surrender property if they pay for all or most of their shared home. A spouse who makes a down payment may later surrender part of their interest in the residence.

Using pre-marital money to purchase a home can commingle funds. This can confuse ownership and other financial matters.

If an unmarried couple purchase a home, they should specify ownership interests in their prenuptial or postnuptial agreements and how the property will be allocated in a divorce. The deed should also specify ownership.

An attorney can help assure that each person’s rights are protected. They can assist with drafting a fair and reasonable agreement that complies with Michigan’s legal requirements.