When Unmarried Older Couples Buy a Home

Help your client find the right threshold of protection.

By Amanda J. Shuman
Amanda Shuman
Amanda Shuman

After their marriages end, either by divorce or through one spouse’s death, many of my baby boomer and senior clients are meeting new romantic partners but choosing not to get remarried. When that decision comes up, finances are usually at the forefront.

These clients want to protect their individual assets while moving forward with their new relationships. While conversations about these decisions may begin with their financial advisors, there are some legal protections that they should be addressing too: An estate plan, a prenuptial agreement, or, when purchasing real estate with a new partner, a co-ownership agreement.

Essential Legal Protections

When I talk to a client about such an agreement, I want to make sure that she has the following in place:

• A mechanism to get back the money she puts into the real estate.
• An “escape clause” for how to stop co-owning real estate if the relationship ends or if she needs her money for other purposes.
• Rights to the property in case her partner predeceases her.
• Her name recorded on the title.
• A written agreement so the decisions she makes with her partner are enforceable.

A co-ownership agreement is essential for an unmarried couple who are buying a house together. Without any indication to the contrary, either on title or with an agreement, the rights of each partner will be considered equal. And, if the relationship goes south and a buyout of the property cannot be negotiated, then the party who wants the property sold will have to take court action to force the sale, which takes more time, more money and an emotional toll.

A co-ownership agreement establishes the rights of each partner in the real estate, and it also sets out what will happen in the worst-case scenarios of the relationship ending or one partner dying before the other. It’s also important for partners to have these conversations before real estate is purchased so they know they are on the same page.

Planning for Adult Children

I had a client recently who came to me for a co-ownership agreement between her and her partner. She was in her early 60s, had been widowed, and had children from her first marriage who were concerned that a new partner would not be careful with her money.

My client’s biggest concern was wanting to ensure that her interest in the property would pass to her children rather than her partner. She was very uncertain whether she and her partner would get married; having been widowed, she was receiving some benefits from her late husband and it did not make financial sense to remarry. She was also putting in a larger share of the couple’s down payment.

We tailored her co-ownership agreement in the following ways:

In case the parties ended their relationship: The biggest question the agreement needed to answer about the end of the relationship was: What would happen to the real estate? For example: Would it have to be sold? Would one partner have the right to buy out the other? If a buyout was allowed, who got the first right of refusal?

We decided to agree ahead of time that one partner could buy out the other. Since neither my client nor her partner had strong feelings about which of them should have first right of refusal, we agreed they could determine that by flipping a coin. We also committed to the timeline for a buyout, and how the value of the property would be calculated. The goal was to settle these possible disputes ahead of time so that the outcome was clear to both partners.

In case my client died before her partner: How the partners held title to the property would be important in meeting my client’s goal to protect her adult children in the event that she died before her partner. As an unmarried couple they had two title options: Tenants in common or joint tenants with survivorship rights. With title held as tenants in common, each partner’s interest would pass separately so that my client’s children would inherit her half of the property and whomever her partner designated in his will would inherit his interest. If they held the property as joint tenants with survivorship rights, then the surviving partner would automatically receive 100% of the interest in the property upon the other partner’s death.

So that my client could ensure her children would inherit her portion of the property, she and her partner agreed to hold title as tenants in common. We also discussed the need for each of them to create an estate plan after they purchased their house so that the surviving partner’s rights in the event of death were spelled out.

One option would be for my client to leave her share of the house to her children but allow her partner to remain living in the home for a certain period of time before it had to be sold and the money split between the surviving partner and my client’s children. (Having an estate plan is important, and when you buy real estate it’s a great time to talk to your attorney about this!)

We also talked about life insurance and how much each partner should maintain on their life so that the surviving partner could pay for the house. This is an often-overlooked aspect of buying a house and it’s an important discussion to have.

Protecting her money: As I mentioned, my client was putting a larger share of the down payment into the house and she wanted to ensure that she could recoup that money if the house were sold or if there was a buyout. She also needed to know that if she needed a large amount of liquid assets for something (e.g., to move into an assisted living facility), that would still be possible. We determined trigger events to a sale or buyout and a formula: Each party would get their initial contributions to the down payment back, and then each of them would recoup any money they paid towards agreed-upon home renovations or further down payments of principal to the mortgage before splitting the remaining net equity.

Having these issues decided and written into an agreement before buying a house together may seem like overkill. However, when your clients are an unmarried couple, there are no guaranteed property rights. Everything should be written out in an easy-to-follow contract. They should think of it like insurance: Plan for the worst and hope for the best (and that they never need it!).

Attorney Amanda Shuman focuses on family law at DangerLaw, LLC, Newton, Mass. She can be contacted at amanda@dangerlaw.com.

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