If you’re engaged, you and your fiancé may decide to buy a home together before marriage. While no one likes to think about a breakup, it is important to have financial discussions before marriage. A prenuptial agreement can protect your respective interests in the home if you do tie the knot and then divorce later. However, if you end the relationship before marriage, the prenup doesn’t work and you may face unexpected problems dealing with the home.
Prenuptial Agreement
A prenup enables parties to specify how they want to divide their assets in the event of divorce, separation or death and may also address spousal support as well as estate rights. The assets discussed in a prenup would include any property the parties may have purchased together before marriage. A prenup is signed before the vows are exchanged, but doesn’t go into effect until the parties are wed. Accordingly, the terms don’t apply to any property that a couple buys before marriage if they never actually get married.
Protecting Joint Property Purchased Before Marriage
If you buy joint property before marriage, it is best to have a written contract known as a cohabitation agreement that sets forth how you will deal with the property while you are together as well as what happens if your relationship ends. Key terms include:
- Treatment of the down payment. The cohabitation agreement should indicate who paid the down payment and whether that person will be refunded from the proceeds of a sale or buyout of the property before the remaining proceeds are divided.
- Expenses. You should agree on how and who will pay the mortgage, utilities and other expenses and whether and how those payments may be credited when dividing the proceeds of a sale/buyout of the property.
- Right to buyout. If you break up, one of you may want to buy out the other. The agreement should indicate how you will value the property to determine the amount to be paid.
- Conflicts over the disposition of the home. A buyout works if only one party wants the property. However, if both of you want it, you should include a provision regarding how you will decide who gets it. For example, you will try mediation first. Alternatively, if neither of you wants the property, you should indicate how you will come to a price to sell it and resolve disputes over an offer. These clauses help avoid costly litigation.
In the event you do get married, your prenup will supersede the contract that relates solely to the joint home. In this way, there is no confusion about how you want to treat the home if you later get divorced.
Finances are a frequent source of relationship problems. Discussing these issues and putting your agreements in writing minimizes conflicts and makes your relationship stronger. You should also make sure that all agreements are vetted by an attorney for each party to ensure they are fair and address the needs of each side.
Please contact us to discuss how we can help you achieve a positive outcome.
