Are you and your significant other contemplating living together, either in advance of getting married or simply to save expenses and make things more convenient since you're together most of the time anyway? If so, it may be wise to consider getting a document similar to a prenuptial agreement before you buy a single piece of furniture together or pay your first joint electric bill. It's commonly called a partnership agreement.
What Can Be Covered in a Partnership Agreement?
A partnership agreement serves some of the same purposes as a prenup, such as how assets purchased together will be distributed if the relationship ends. However, couples can also use it to detail how shared expenses (such as rent, utilities, insurance and food) will be divided. They can also spell out what will happen if one person is unable to contribute equally (or at all) to household expenses if the individual lose's his or her job, become ill or some other unforeseen circumstance occurs.
If a couple decides to purchase a home together, a partnership agreement can be particularly critical. It's essential how you want the title to read. If the couple's names are on it as tenants in common and one of them passes away, that person's heirs are entitled to half of the property. If they are listed as joint tenants who have right of survivorship and one dies, the other one gets the entire property.
This is important to consider, particularly if one or both of you has children to whom you want to inherit your share of the property. The way the home is titled overrides anything you may have designated in your estate plan.
Why Separate Lawyers Are Necessary
Just as with a prenup, when couples draft a partnership agreement, each person should have his or her attorney involved in the process. If one person's attorney draws up the agreement, the other person's attorney should review and discuss it with his or her client. This ensures that the client is being treated fairly, understands the terms of the agreement and is getting what he or she is seeking. By having separate legal counsel, you also help ensure that the agreement will hold up in court should one person choose to contest all or part of it.
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