The Cohabitation Agreement and Prenup

by Susan Paige
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I’m all for storybook endings, but divorce is an unfortunate part of life for many people these days. Almost half of marriages end in divorce these days. The top cause? In many cases it’s money.

I bet former Beatle Paul McCartney wishes he had signed a prenup. He paid out almost $50 million in a divorce settlement to his second wife Heather Mills (hopefully he learned his lesson and signed a prenup with his third wife).

I hope your relationship or marriage works out and you’re together for the years to come, but it’s important to be prepared in case it doesn’t, especially when it comes to real estate.

 

The Matrimonial Home

When it comes to the family home (referred to in law as the matrimonial home), it’s important to recognize there’s a difference between living common law and being married. Family law differs depending on where you live, so I’ll discuss it only in general terms here.

Let’s say that prior to their relationship, Kanye owns a home in Edmonton and Kim doesn’t. With their relationship going well, Kanye invites Kim to move in. Fast-forward three years and things aren’t working out. If the couple were married, Kim would be entitled to half the value of the home, since it’s considered the matrimonial home. But if Kanye and Kim are living common law, Kim would likely only be entitled to half of the home’s price increase during the time she lived there (i.e., she wouldn’t automatically be entitled to half the home’s value).

The above is meant only to serve as a cautionary tale—I’m not a family lawyer, but I recommend consulting with one before moving in together.

 

Signing a Cohabitation or Prenup Agreement

Whether you’re still dating or ready to walk down the aisle, it’s important to talk about money. There’s no set time in a relationship to have the money talk, as long as it’s before moving in together. Find out about your partner’s income—what they own (assets) and what they owe (debts). While it would be nice to simply be able to take your fiancé’s word for it, politely ask for proof in writing, like a financial statement. (Hey, the bank wouldn’t get into a relationship with you without seeing proof, and you shouldn’t either.)

There’s often a difference between perception and reality. Your fiancé might drive a BMW and wine and dine you at fancy restaurants, but when you look at his finances, you could find out he owns nothing and owes everyone. I’m not saying to throw him under the bus and end your relationship right then and there. This is the perfect opportunity to work together as a couple to overcome the challenges, building a financial foundation and future.

If you’re ready to move in together, it’s time to put your love in writing. A cohabitation agreement is a written contract spelling out the rights and responsibilities of the unmarried couple in case the relationship ends. A prenuptial agreement is similar but for couples who are getting married.

 

Brought to you by Sean Cooper

 

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