Cohabitation without marriage is becoming more common in the United States. When you live with a romantic partner, it may feel as though you share everything. And to some extent, this may be true, legally speaking.
Joint Ownership and Unmarried Couples. As the number of cohabitating partners has increased, so has the number of unmarried couples buying homes together. Although it might make financial sense to buy a home together, a property that is jointly owned by both partners presents legal risks and obligations to each co-owner. These same risks and obligations can arise if one partner already owns a home (or another asset) and adds their partner to the title.
First, adding another person to the title of a property can trigger gift tax consequences. In addition, once a joint owner is added to the property, that property can immediately be susceptible to the new joint owner’s creditors. Obviously, this has implications for the original owner if a new joint owner’s creditor goes after the now jointly owned property to satisfy the debt.
Finally, depending on how the property is titled, unmarried partners who buy a home together could inherit each other’s share of the property automatically. This happens when the property is deeded to the new owners as joint tenants with the right of survivorship.
A cohabitation property agreement that protects each partner’s property interests should also be considered. An agreement of this type can include a dispute resolution process, an exit strategy, a buyout agreement, and a plan for account and property division if and when the couple splits up, or one of the partners dies.
Imagine that you add your partner to the title of your house so that legally, half of the house is theirs. After a split, they are unwilling to return their share to you. To get it back, you would have to buy it from them. But what if they do not want to sell it to you? Alternatively, they could buy your share, or they could sell their share to another party. They could also petition the court to carry out a forced sale of the property and distribute the proceeds among the two of you, or ask the court to partition the property. In any case, these are probably not scenarios you would have agreed to if you had thought through your gift of joint tenancy ahead of time.
Love and the Law: It Is Okay to Ask Questions. Even though cohabitation without marriage is more popular than ever, unmarried couples still do not have all the legal protections that married couples enjoy. You might be certain that you have met “the one,” and you may be right. But before you hand over the keys—literally and figuratively—to another person, or sign on the dotted line with them, there is no shame in talking to a lawyer about how to protect yourself. If you have any questions about how to gift property to your significant other, please contact us.