Cohabitation Agreements

A Cohabitation Agreement is a domestic contract for partners who plan to reside together or who are already doing so. It is also commonly known as a prenuptial (“prenup”) agreement. One or both partners wish to preserve personal ownership of property they either brought into the relationship or expect to receive, such as an inheritance or a significant gift.  Ownership in or a division of property may be one facet of the agreement. Other provisions may relate to how the partners share financial responsibilities during cohabitation or whether future support obligations will be considered.

A shareholder in a family corporation may not wish to partially relinquish or share ownership of any interest in the business with their partner until there is some permanence in the relationship or upon marriage.  A part owner with siblings of a resort property or timeshare is required as a signatory to the partnership agreement to restrict ownership in any form with any spouse or partner of a sibling. Without the Cohabitation Agreement, if the domestic relationship were to fail, the siblings could find themselves part owner with an unintended partner.

Domestic Contract

Domestic Contract is the umbrella term for a specific list of family contracts entered into by spouses or family partners. The contract must meet several formal requirements to be enforceable. These include:

  • the contract must be in writing
  • each party must sign before a witness
  • the witnesses must also add their signatures to the document, and
  • the date when the last signatory signed must be indicated.

The group of Domestic Contracts includes cohabitation agreementsmarriage contracts, paternity agreements, separation agreements, and family arbitration agreements.

Cohabitation Agreement’s Transitional Nature

A Cohabitation Agreement will often provide that if the clients decide to formalize their union the Cohabitation Agreement transitions to become a Marriage Contract.  Even if the agreement provided for this transition, it is important to review the agreement to ensure that the terms continue to reflect the spouses’ mutual and independent intentions.

If the common-law relationship or the subsequent marriage fails, then the contract becomes a Separation Agreement whereby the prior, agreed sharing of property is put into play.

This transitional nature of a Domestic Contract is both efficient and cost effective. Clients can continue to rely on the arrangement they struck without having to renegotiate matters.

That is not to say that clients should believe that what was negotiated years ago may necessarily remain relevant. It is prudent to review the terms of the agreement on a regular basis independently with a family law lawyer to ensure the agreement continues to provide what each client needs and wishes. It will also ensure that any changes in the law to the benefit of the client are incorporated into the agreement.

Negotiated without Duress

The terms of the Cohabitation Agreement must be negotiated in good faith. A voluntary willingness by both partners to enter into the contract must be evident. Any coercion, threats or feelings of duress by a client prior to and during the negotiations of the terms of the proposed contract should be investigated by the client’s lawyer.

Exchange of Full Financial Disclosure

The process of providing financial disclosure is necessary for the full consideration of requests by one partner to approach prospective property division and future financial support in a manner different from what is provided by the common law. Each of these issues demand different kinds of documentary disclosure, calculations, and may require different designated valuators. Knowing the scope of possible asset value informs a non-owning spouse of the potential economic impact of waiving an interest in the asset should the partners separate.  How assets are used, who contributes to the acquisition of wealth, what non-financial contributions are made to sustain the lifestyle of the spouses and other circumstances need to be considered today to develop a durable contract for the future.

It is the responsibility of each client to meet the disclosure requirement. This is the case whether or not they may eventually decide to waive any entitlement to receive a share of the other’s property or to receive spousal support.

There must be comprehensive financial disclosure exchanged between the clients at the time the Cohabitation Agreement is contemplated and negotiated. The ‘full and frank” sworn financial statement and all related supporting documentation are exchanged between the clients through their respective lawyers. Requests to provide proper values of all assets, debts and liabilities must be answered to the satisfaction of the client making the request.

Provisions Relating to Children

The best interests of the children of a relationship must always be paramount. Provisions in a Cohabitation Agreement stipulating requirements for custody (decision making) or parental access to any of the children of the relationship will be unenforceable. Custody and access decisions by their very nature need to be responsive to and immediately relate to the welfare of children.

Similarly, the child support is a legal and moral right of each child until they become financially independent.  Provisions of a domestic agreement must be in accord with the Child Support Guidelines in nature and in practice.