People take for granted the legal rights afforded to married couples. If one of the couple dies, the other inherits their joint property and may receive social security or retirement benefits. If the couple divorces, their assets are divided between them. Unfortunately, these same rights don't apply to unmarried couples, so financial planning may actually be more critical for them than for those who have tied the knot.

Why Do I Need a Nonmarital Agreement?

It may not sound romantic, but it's wise to have a written agreement that spells out how property, other assets, and shared expenses will be handled if your relationship ends. The best legal protection for unmarried couples living together is a nonmarital agreement, also referred to as a cohabitation, relationship, or “living together” agreement. It's a written contract that gives each of you legal control over your property and finances if the relationship ends, and it can save you attorney's fees and court costs if there's any disagreement about who gets what.

There are obvious financial benefits to living together, such as sharing rent and utilities, but there are also dangers involved, especially if you already own assets. Remember that 50 percent of marriages end in divorce, and an even larger percentage of unwed couples eventually go their separate ways. If you're in your twenties and haven't accumulated many assets yet, a nonmarital agreement may seem totally unnecessary. If your relationship is likely to be short term, you may be right. But if you're in a committed relationship that you expect to be long term, a nonmarital agreement is important.

A failed relationship often causes problems with debt when the relationship ends. You may get stuck with the bills for things you bought together. If the apartment or house you share with your partner was leased in your name based on your joint income, you may find you can't afford the rent after you and your partner split. You may have lent your partner money or cosigned on a loan, only to be left holding the bag. If you buy a house together, you could be the one out on the street but still responsible for paying the mortgage. By taking a few precautions, you can protect yourself against these and other potential problems. You're never too young to make wise legal and financial choices, especially if you earn a good salary and are accumulating assets such as cars, real estate, and investments.

What's Covered in a Nonmarital Agreement?

Nonmarital agreements can cover a wide range of issues but are especially critical if you're buying a house together, purchasing other large assets with joint funds, or coming into the relationship with previously owned property or assets, or if one of you has a lot of debt. If your partner has large debts, you should protect yourself against creditors who may seize joint property if your partner falls behind in the payments.

The agreement can accomplish the following:

• Address how property you own and what you accumulate together will be handled if you no longer live together.

• Cover how gifts or inheritances will be dealt with.

• Include provisions for support after separation or death, or an agreement to waive the right to palimony.

• Spell out who's responsible for the mortgage and who gets to take the tax deduction for interest.

• Stipulate that property be kept separate.

• Indicate who gets to keep a rental apartment if you split up.

• Discuss how credit cards and other debt will be handled.

• Cover a myriad of other issues tailored to your personal situation.

It's a good idea to include a clause stating that mediation will be used for resolving any disputes and that if you still can't come to an agreement after mediation you'll go to formal and binding arbitration. This will save you from the expense and hassle of a messy lawsuit.

Timing Is Everything

You may feel uncomfortable planning for what will happen if your relationship ends, but you can save yourself a lot of potential stress, expense, and grief if you make these plans while your relationship is good and you can communicate effectively. If one of you owns significantly more assets than the other, an agreement of this type may make that partner feel more comfortable about merging them into one household. It can take considerable pressure off your relationship to have this addressed early on and not have to deal with niggling doubts and concerns.

What Happens Without a Nonmarital Agreement?

If you can't settle issues at the end of your relationship regarding who owns what, you may end up in court. In most states the court will first ask if there's a written contract, and if there isn't, will try to determine if there was an oral agreement (difficult to prove). If not, the court will examine your actions to try to determine if there was an implied contract. If there's proof that you've shared expenses and assets equally, for instance, or that you shared a bank account, the court could rule that there's an implied contract and enforce it as such. One of you may end up paying a settlement or support payments to the other, even in the absence of a written or oral agreement.

This is a general overview of nonmarital agreements and is not offered as legal advice. Sometimes laws in a particular state will override anything you write in an agreement, so you may think you're protected when in fact you may not be. If, after reading this material, you decide you want a non-marital agreement, contact an attorney.