4 Things To Think About If You Are An Unmarried Couple Jointly Owning Property

Virginia law has special treatment for couples who are married and own real property together. But what about unmarried couples? Couples often choose to cohabitate without getting married, for a number of diverse reasons.  But such couples often have to think more carefully about their expectations for their jointly-owned property at death.  Here are some practical and planning considerations for unmarried couples who own their home (or other real estate) together.

1. Titling: Unmarried couples can own real property one of two ways.  If they own property as “tenants in common,” each person has the right to transfer his or her interest to a third party, both during life and at death. However, if the property is owned as “joint tenants with the right of survivorship,” at the death of the first person, the survivor automatically owns the entire property.  Therefore, couples should consider which result they prefer and confirm that the property is appropriately titled.  If not, the title can be corrected by deed.
2. Contributions: If each person intends to leave his or her interest in the property to his or her heirs outside the relationship, another consideration is whether their interests should be considered equal.  For example, if each party contributed half of the cost of the property and each pays for half of any necessary repairs or improvements as they arise, a 50/50 division is appropriate.  However, if one party contributes more of the purchasing price, or later pays to replace the roof or add a garage, the couple may want to adjust their respective interests to reflect this.  If this is the intention, the couple should keep very clear records of each party’s contribution to the value of the property so that their estate planner, executor and/or trustee, and heirs understand the proper division.
3. Contents: In situations where unmarried couples cohabitate, division of the real estate itself is not the only source of confusion.  Generally, it is not obvious to outsiders which tangible personal property (such as art, furniture, and other household items) belongs to which person.  This means it can be difficult for heirs and fiduciaries to determine which items should remain with the survivor and which ones are part of the decedent’s estate.  Therefore, it is a good idea to keep a list of which items belong to whom, or at least to use a list or memorandum of specific items to go to specific heirs at each individual’s death.  The list is incorporated into the individual’s will but can be updated or replaced as often as desired, without the need to change the person’s entire will.
4. Marriage: Unmarried couples who acquired real property together may later decide to tie the knot. In that situation, it’s best for the couple to revisit the issues listed above to determine whether their thinking has changed about the best treatment.  Married couples may wish to own their real property as “tenants by the entirety,” a type of title that incorporates special creditor protection. Married couples also have certain statutory entitlements that can only be waived by contract, so it might be appropriate to discuss making a premarital agreement to memorialize the couple’s intentions if they are keeping track of their respective contributions to the value of the property.

If you have questions about record keeping, titling, estate planning, or premarital agreements, call us now!  It’s better to get organized now than to have your fiduciaries trying to guess at your intentions after the fact.

Romantic And Practical Reasons To Consider A Premarital Agreement

Premarital agreements are not commonly considered romantic.  They get an especially negative treatment in the media - anyone who broaches the topic in a movie or TV show has nefarious intentions.  We are looking to restore the reputation of premarital agreements (just in time for Valentine’s Day) because we believe there are plenty of romantic and practical reasons to consider whether such an agreement makes sense for your future.

Similar to the discussion in our last blog post, default state laws control the division and disposition of a married person’s assets when the marriage ends.  The rules are different depending upon whether the marriage ended in divorce or death.  One often-overlooked aspect of marital planning is the latter; that is, what is your spouse entitled to inherit when you die?  This question often comes up in the context of second marriages.  Each spouse may enter the marriage with assets acquired long before the contemplated marriage and continue to earn and grow assets during the marriage.  When one or both parties have children, they often wish to pass part or all of those resources to their own children.  People entering into marriage under these circumstances might not realize that spouses have a right to inherit some of those assets, depending upon various factors including the source of the assets, the respective assets of each party, and the length of marriage.  Setting expectations about inheritance early can be a profound act of love, both for a spouse and children.  When surprises emerge after one spouse’s death, it frequently leads to estrangement, hurt feelings, and, unfortunately, litigation which depletes the estate and postpones the grieving process.

This is true outside the context of blended families, as well.  Money is cited again and again as a leading source of marital conflict in articles on the topic; and people have all kinds of reasons for raising the possibility of a premarital agreement.  Clients often seek advice about protecting inherited assets for the ultimate benefit of their future children, minimizing taxes, or changing state law presumptions to meet their specific situation.  

So often, the perception is that the purpose of premarital agreements is to “plan for divorce,” and agreements often include provisions requiring (or limiting) alimony and setting property division terms.  But is this really so unromantic?  An honest conversation with your future spouse about these topics is actually a good idea.  Good relationships are born and sustained by good communication.  Asking the question if a premarital agreement is right for your relationship is a way to clear the air about your concerns for the future.  Perhaps a high-earning spouse with equally high student loans fears adding alimony to her list of obligations.  Or, a spouse who leaves a career to move and be with the other spouse, fears losing earning capacity without adequate security.  These documents are highly flexible and can be tailored to have a very narrow focus or a quite expansive one to fit each couple’s situation and relieve anxiety about the future.

Finally, you might consider making a premarital agreement to be an act of love for the moment when you’re least likely to feel it.  Marital conflict, separation, and divorce are some of the most traumatizing events a person can experience.  Agreeing in advance about how to settle your financial affairs if things go wrong can create certainty during conflict so that you and your spouse can focus on the cause of that conflict and potentially resolve it without letting financial fear take the wheel.  It can even send the message, “I love you so much that I want to make it easier for both of us if we are someday going through the pain of breaking up.”  

So, here is our Happy Valentine’s Day to you with a twist: Cupid’s love arrow may fly straight and strong, and when it sticks, it sinks even deeper if you can talk about money and security with love and care for one another.  To learn more about default state laws and analyze whether a premarital agreement is right for you and your intended, contact Schooley Law Firm.