Cohabitation Issues

Marriage rates have declined by 66% since 1950, according to a recent study by the University of Maryland. The study also highlights the increase in the average age of couples when they actually marry. This increase reflects a societal shift in how Americans view marriage and relationships. Notably, two-thirds of married couples lived together prior to marriage, while other couples chose cohabitation as a committed alternative to marriage.

Couples who live this type of lifestyle may unknowingly open themselves up to significant legal consequences if they break up. The line between matrimonial law, commercial litigation and estate planning blurs when unmarried couples begin to acquire real estate, open joint financial accounts, and generally become financially interdependent on one another. When the relationship ends, the couple may seek the advice of a family lawyer to address the problems this non-traditional family is facing.

Various tax, estate, and other legal issues arise when people begin to comingle their financial and personal lives outside the construct of marriage. Opening a joint brokerage account or acquiring real estate, for example, present a number of considerations for unmarried individuals. In order to handle this situation, it is critical for the matrimonial attorney to be versed in partition actions and tax consequences arising from the transfer of assets. For example, if an unmarried couple has a child, one of the parties may convey title to his/her separately owned residence to both parties, to make the parties cotenants with rights of survivorship and, thus, create some financial security in the event one parent dies. But what happens if the parties do not marry and the relationship ends? Who moves out? What can be claimed as a credit? What needs to be repaid? The transferring party will have to rely upon a partition action to reclaim sole ownership of the property. The practitioner must be cognizant of the statute of limitations for partitioning the property to ensure that the client can pursue all of the credits available from an investment in the asset. If one party relinquishes his/her interest in the property to the former partner, tax issues must be considered because the parties will not enjoy the tax breaks available to married couples.

Aaron Weems is a member of Fox Rothschild LLP's family law group.