Tuesday, October 9, 2007

Cohabitation agreements - financial concerns

I ran across two articles on cohabitation from two financial publications. Both are worth reading.

The Motley Fool UK published How To Move In With A Partner: Part Two (the article contains a link to Part One that has some good ideas but not much to do with cohabitation agreements). So you are wondering what good is an article written for the UK? The points I think you will find useful in the article are if the relationship is to be or has been long term:

  1. A Will.
  2. Insurance.
  3. Pensions.
  4. Joint tenancy for real estate.
Kiplinger's Retirement Report published the other article, Living Together? Set Up Boundaries. This article points out why retirees need a cohabitation agreement but I say the same things apply to anyone:
In many cases, family lawyers and estate planners say, retirees start sharing a roof without discussing any of these details. Such neglect could have unintended consequences. If one person becomes ill, a domestic partner, unlike a spouse, has no legal rights to make medical decisions. Also, cohabitants do not have inheritance rights, as married couples do. A partner could end up in financial straits, perhaps losing the house the couple shared for many years, if the other dies without making arrangements beforehand.
This article provides both a bit more and bit less than the Motley Fool article. I find the following to be very good advice.

Make sure the agreement lists both parties' assets and liabilities. That way, neither companion can later claim ignorance of the other's financial worth. Consider giving your partner a financial power of attorney, so he or she can sign your tax return if you become incapacitated. Randall Kessler, a partner at Kessler, Schwarz & Solomiany, in Atlanta, suggests providing only limited power, perhaps setting a one-year time period and a monthly ceiling on the amount that can be withdrawn from an account. If it's unlimited and you break up with your partner, you'll have to remember to undo the power of attorney.

The cohabitation agreement should lay out who gets any property if you terminate the relationship. If one partner owns the house you're living in, you need to specify living arrangements if the partnership ends. Without an agreement, the owner of the house can legally evict the other if there's a nasty breakup, Kessler says.

An agreement could also protect a companion who needs to continue living in the house after a partner dies. "You need to make arrangements beforehand so the adult children don't come in and say, 'It's been great you've taken care of Dad, but you've got 24 hours to get out,'" says Kyle Krull, an estate-planning lawyer in Overland Park.

A cohabitation agreement is separate from a will, which protects your heirs when you die. For example, you can note in your will that your children will get the house after your companion dies. Keep your estate planner informed so that the agreement doesn't conflict with your will.

Please feel free to contact me if you are an Indiana resident and want a cohabitation agreement. Remember if you want to read the other articles I have posted on cohabitation agreement, all you need do is click on the cohabitation label below.

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