CJ: Welcome to the Noyack Wealth Weekly expert series powered by Noyack Wealth Club at 501c3 nonprofit dedicated to empowering Millennials and gen Z through financial education. Our mission is simple, help you navigate wealth management, align your Investments with your values and prepare for the largest wealth transfer in history. At the core of this mission is Noyack Wealth Weekly, the number one personal wealth management newsletter now brought to life through this podcast or expert series.
I’m CJ Follini extreme sick, founder of Noyack Wealth Club and today we’re diving into a critical yet often overlooked topic, cohabitation agreements, something that is going to become very near and dear to my heart very soon. More couples than ever are choosing to live together instead of marrying, but without the right legal protections breakups can lead to Serious Financial consequences, don’t I know it. To help us break it all down we’re joined by Meredith merer, a leading expert in asset protection at Bernstein sh in Maine and Boston. She’ll share what these agreements should include, why they matter and how they can Safeguard your financial future. Let’s get started and welcome.
Meredith: Thank you. I’m glad to to be invited back.
CJ: The first one was a barn burner and everyone loved it so here you are.
Meredith: Thank you.
CJ: This is just gonna be a very hot topic.
Meredith: It is.
CJ: Let’s let’s dive into it. I keep hearing about cohabitation agreements, do normal couples even need them?
Meredith: That’s a that’s a great question and the answer is they they are absolutely for normal people. I think the quote that said give someone $200,000 and they’re going to fight over it. It’s a small investment to make reducing an already difficult time if you are sharing property that you’ve both invested in or you have a joint bank account. I will say the only thing more expensive than a cohabitation agreement is protracted litigation to split up to decide who gets the house, who gets the bank account. The hope with something like this may be a prenup, a post or cohabitation agreement is you sign it and it never comes out. You don’t take it out of the drawer but when you do need it, it is sort of clean efficient way to ensure that it’s less emotionally driven. Someone doesn’t end up holding the bag and you’re able to more ebly make an exit from a long-term important relationship but you’re exiting that important relationship.
CJ: You are.
Meredith: You’re thinking about it as like two parties sort of literally entering into a contract and sometimes we do partnership contracts so to call them cohabitation family formation contracts. So the idea is you’re sitting down, you’re really hammering out these with details and it could be everything from yes we both invested in a house to if one of us wants to end the relationship how long does the other have to move out or who gets the pets. So it’s really crosses a span more so than just what is covered under law for for in the case of a divorce or a conscious uncoming according to conscious on cuming.
CJ: Second question, what’s the biggest money mistake couples make when they move in together?
Meredith: That the person you move in with is not the person you break up with. It’s not having the uncomfortable conversations and I think the decision to move in together is a big one and there is a lot of Dreams behind it a lot of times. I think the conversation around Logistics is really uncomfortable in some ways. Prenups like cohabitation like 90% are never signed because it’s that really sort of this is what I’m coming in, this is what you’re coming in and there’s a transparency. If you are joining together in an apartment and a life together can you say to the other person these are my expectations for like what happens if family comes in. The biggest money mistake is being casual, not making a plan. The plan could be we have separate bank accounts and we have one account that pays for house expenses. I think titling is another huge mistake. Let’s say somebody owned the house, the other person moves in and starts paying the mortgage, well if they break up well you had the down payment but I paid part of the mortgage instead of saying like is it joint ownership. These things end two ways, death or breakup, and in the event of a death it’s incredibly sad but let’s take that same situation where you have house titled in one name and they are never married and the owner passes away, the the partner that is still living there is going to be evicted by the family. You hope that’s not the case but they have absolutely no legal rights. So it’s sort of understanding that you hope you’re going to make it forever but without something in place there’s no recognition of a unmarried partner, cohabitating partner.
CJ: Should couples always split the rent 5050 or is there a fair way when incomes are different between them?
Meredith: We usually talk about prata salaries EV flow through life and just because you start off with one person who’s let’s say is an investment banker but then decides to go back to school, then you have someone else carrying that and then maybe they add a child to the mix. There isn’t necessarily always like a linear wealth building and what does that mean. If two people invest in a house and they put in equal money it’s a pretty easy math on how you get out of it, okay we sell it we split it 50/50. What happens if part of wealth building is one of the partners decides to stay home perhaps take care of kids or their career takes a backseat and they help out with the building of another business, throwing parties or writing thank you cards or being part of like marketing and sort of that unpaid labor that goes into a partnership. Unlike in a marriage when there’s a divorce that sort of contribution is recognized but not in a cohabitation.
CJ: Actually it’s funny to bring that up, what you just said reminds me of a divorce I read about but it was a senior exe, very senior executive at General Electric and his wife followed him around the world. He was promoted to Leading all of their businesses all around the world and she gave up her career, follow him, support him, hosted all other Executives and and whatever it takes to build a career in network and then he filed for divorce and she claimed all those years of unpaid labor. And the courts they sided with her and she got compensated for years and and there was a prenup, she filed as unpaid labor.
Meredith: I think it’s really fascinating and I think there’s a lot of reality about that may it be and this isn’t necessarily a male female thing. The contributions of a partner maybe editing your writing or managing others C or marketing and stuff, but like very rarely is the building of a company and building of a brand and building of a career a solo Enterprise. When I talk to couples let’s say they’re married and I say you need life insurance for husband and wife and and wife may stay home and take care of the kids and the husband will go, oh but she doesn’t work, and I go yes but she works in the home. And all of those things that allow you to be an executive or be a partner in a law firm like cooking, taking care of the kids, whatever like you have to hire someone to do those things. Then it’s like oh wow a driver, a cook, cleaning, all of those things, then the value around that work is sort of recognized, it’s the building the family business, it’s labor right.
CJ: Oh yeah absolutely fre lunch and everyone should get paid for their labor, simple. I believe it however I’m getting this argument right from my wife right now who has given up a very successful career even know she’s on the board of Arts institutions, she gave up a very active career to the the home parent for our two boys. So I hear it a lot already and we’re GNA be talking about it for our cohabitation right.
Meredith: I think it’s a really important conversation to have early on in May Be cohabitation may it be partnership. Someone can unexpectedly end up in a place where having one parent stay home with a child their career maybe isn’t going to earn as much or be less expensive while another is going gang busters. And so it’s like is this what we believe in and what would happen because re-entering the workforce after a decade out or something is difficult, those are difficult conversations to have.
CJ: It’s exactly what my wife said to me. So I want to clarify one thing before we move on to the next question, is when splitting expenses specifically what is your go-to recommendation given either equal or unequal incomes?
Meredith: I think the prata is great an understanding of separate accounts, joint account, a house account, PR contribution, but also what are sort of external resources and other commitments. One of the benefits of remaining unmarried is you’re not responsible for the other person’s debt so if they have student loans the other doesn’t, you’re in very different situations and that’s a conversation worth having. You get married and the other person is on the hook for that. You’re not looking over each other’s shoulder but there is an equal contribution to a joint account for house expenses. So there’s an expense account, there’s contributions, you decide what the pr radics difference or ratio is, it could be 5050, it could not.
CJ: That’s a great idea and there’s no like you did this I did that, actually one I think I’m gonna use.
Meredith: You absolutely should, and then and then from the perspective of like what you contribute into it, if there is a future disillusion and like that’s the account that pays the mortgage, you go well I paid 70% you paid 30%, and it’s it’s sort of easier to track. Those are sort of the hard asset aspects of it.
CJ: That is very actionable advice right there, get an expense account and contribute prata as per agreement. How do you bring up a cohabitation agreement without making it super awkward, that that’s sort of why I’ve been procrastinating. I I we have so many conversations about so many things, parenting three and a four-year-old, oh do we need a really another tough conversation.
Meredith: I find them to be actually more collaborative, there are Provisions in place that have to do with kids, child support is X but I think there’s also you reduce animosity. What I found in negotiations someone will say 90 days to move out and even listing like when you move into a place together, you’re going to have something like this skateboard belonged to my brother, it was painted by a tattoo artist, it like it means a lot to me of of like huge value no but like in a breakup situation I would want to take it with me. And so if people can sort of get that list or like an understanding of like yeah we may go in together on the couch but my mother’s painting or whatever then there’s not like gatekeeping around that or an understanding of like listen I really want to update your bathroom because I want a soaking tub, okay I can’t afford to do that so if you put the money into the soaking tub Upon A later sale I will reimburse you for it.
CJ: But is there really any like go-to tips about bringing up the awkward conversation of the of the agreement?
Meredith: I think that it is actually I I’ll tell you why, here’s a great tip, good fences make for good neighbors. And I don’t want you to be concerned about it’s the worst case scenario, it’s not that we break up, it’s that I die and you could be evicted from the house that I own in my soul name, don’t you want to have rights?
CJ: That’s that’s that’s a good way to frame it, I like that I’m going to use or and given that I’m much much older than a wife I’m GNA use that because she’ll believe it and and I do believe, but I just don’t want to come up with the awkward conversation, we need that puts our love in writing right.
Meredith: And it yeah it is deeply uncomfortable, but I will say from my own perspective of being involved with someone who’s older and has kids that are older like even in a dating scenario, having sort of a clear understanding and agreement of saying I’m not going after anything, this isn’t like trying to take something made the kids so much more comfortable. Like there was a sense of like oh okay like she’s really in it for the right reasons and so like I go beyond a cohabitation agreement because like we don’t share property, we have like between New York Vermont Florida whatever that like if we’re going to purchase property together it’ll be under a limited partnership agreement. But being able to say to a 16 and 18-year-old like guys are inheritance is off the table, that’s what’s not happening here immediately sort of Grease the wheels to have a much more trusting relationship. And the same thing for all like everyone else too that like I think not that you have to share the terms with family and friends but for them to know like, I hate to wish your death of hung you, I haven’t met your wife I assume she’s amazing, but like if you if you were to pass away, there’s life insurance, there’s like those are things you can put in, of like that the days and weeks that follow will be hugely tragic but she’s not going to end up not being able to afford the house and moving the kids out of a school district and stuff like that.
CJ: What when when the problems do happen you don’t need more problems piling on top of them, so let’s take let’s preempt some of these problems with something like a cohabitation agreement, the discussion. Okay really interesting and again something where well you’ve already done it something, I’m I’m about to be involved in with you so very Timely. Last thing for this discussion, if you’re not married does your partner even get anything if something happens to me or to to anyone, should unmarried couples be thinking about estate planning?
Meredith: So they can take under like a contract area but like I said like you got to hire a lawyer, you got to do some sort of like Equitable enrichment, it’s going to be really hard to not hard but like oh I paid the mortgage on his house so now I’m going to go back and try to like collect it and you’re going to be in court like that is an amazingly expensive mishas and it’s so much more expensive than sitting down and having that uncomfortable conversation. But no the answer is no like there’s not common law marriage out there.
CJ: So if you’re an unmarried couple and you break up there’s no recognition for you, you’re an unmarried couple for a long time and and you have a wonderful relationship and everything’s fantastic and tragedy strikes and one passes away what happens then, that’s what I mean that’s what my question.
Meredith: Nothing, nothing, and so that so I’m going to split the split the difference here and say there’s the option of becoming registered domestic Partners which I did with my former spouse in New York, became registered domestic Partners so that I could get access to health insurance and if something happened catastrophic I could be in the hospital. So that’s like you’re not married, you don’t have inheritance rights but you’re registered domestic Partners, however that still doesn’t mean that I inherit his pension or that if he’s in a car accident, no no inheritance. Like registered domestic Partners is more about State recognition for it was it was a health insurance play really not play but like you go to the courthouse, you become registered domestic Partners so I can get on health insurance. But again it’s like those documents, if I want to go to the hospital and visit him and we’re not married you have to do Healthcare directives to each other. And if I’m living in a house owned in his soulle name his kids have every right to come and tell me to get out.
CJ: Wow and so the some people can get palamon like the divorce you were talking about, there sort of a very famous cohabitation breakup situation I think it’s called Marvin where the woman they were along to relationship and she was able to claim she deserved palamon instead of alimony.
Meredith: Wait is that Lee Marvin’s wife?
CJ: I believe it might be, I think it’s that story, yes I remember Marvin the great actor for the big red one, yeah all the westerns and the army movies are lovely Marvin. There’s certainly people that are left out in the cold after as you’re saying in that divorce but instead of having the marriage like the the constraints around marriage, the laws, the understanding it’s even more tenuous. And I know I I think what what you brought up is some of the things that could happen. I don’t think any of us and me included being a a CIO investment and wealth management expert of like decades, I didn’t know so many of these topics that that we’re discussing in the newsletter and now with you. And what I really didn’t know is what bad things could happen, what so what if you really understand what could happen then you’re going to take steps if you’re sane and rational being, you’re going to take steps to prevent them. But no one really knows what the problems could be so by highlighting those in this discussion then you say okay this is what could happen to you, but we have a solution and agreement.
Meredith: And there’s I mean there’s also like the bad case, I got a call this week of someone where dad passed away, girlfriend’s living in the house, oh and how do you get rid of girlfriend who has access to the safe and stuff like that, so it’s also.
CJ: So I’m guessing you’re not representing the girlfriend.
Meredith: Well I don’t I don’t do litigation in this area, it’s it’s very sad but I mean even I think there’s also a lot around not a lot around but like what relationships are and what they look like in this world of like I live in Maine, my partner lives over place like you can be in a long-term committed relationship and not necessarily cohabitate. Like I’ve done agreements with people where it’s like one of them will take a sabatical for three months or one is is part of their job requirement is to be in France for half a year, that doesn’t mean that the relationship is broken down. People can have separate houses and still be in a long-term committed relationship but invest together in like a boat or a vacation home or something like that or third property. And so when you get sort of further and further away from something highly recognizable I think it becomes even more important to spell it out and these are by no means the most expensive documents to craft. It’s the lift if anything is saying like what is our expectation for each other like a prenup, the consideration is marriage and so what is a consideration for cohabitation. And I’ve had people say it’s continuing to this in this case they happen to have like a organic farm and was like continuing to build our Farmstead and like a commitment of life together, you can’t you can’t you cannot put sex in there because then that’s prostitution, that is like literally they will get knocked out.
CJ: That’s that’s your quote. I I think we have to do the outro based on we have to end on that. It’s always like the famous like Felix whatever quote that is like if it flies Floats or and I bad if it fos horses rent don’t buy, so now I say if it flies or like identifies as a fiance or fold rent don’t buy, but like no matter what you can win.
Meredith: You cannot win, the end of a relationship is terrifically sad may it end by a breakup or a death and the best advice is like spend a little bit of money, come to some terms even if they’re not perfect and they will help carry you through a difficult time.
CJ: That is a perfect ending, yeah don’t make it don’t let’s not make a terrible time worse with being unprepared. So I want to thank you because that’s a wrap on this episode of the no expert series for today talking about cohabitation agreements, a huge thank you to you Meredith and I’m G to see you in person in a bunch of weeks.
Meredith: Thank you for I I’m I’m forcing I’m gonna see you when I’m in New York.
CJ: Yeah okay even be for okay great I’m gonna see you sooner I told you that was like I’m I’m running a car you’re not the same but I’m going to rent a car and I’m driving out to H because you’re you’re signing because nobody ever gets signings right so I now require to do signings.
Meredith: Okay I thought I could get you with a christe thing I was like don’t you want to come to Christie’s I I.
CJ: You know what I didn’t understand the message but anyway let me do the out.
Meredith: I’ll invite your wife, I’ll invite your wife to go to chrisy that’s gonna be the punishment if you don’t sign your documents.
CJ: Well thank you again for sharing your expertise on cohabitation agreements and of course being financially prepared. Hey everybody if you found this conversation valuable subscribe, leave a review, share the episode we both appreciate it with someone and then the person you share it with will also benefit and appreciate you as well. Don’t forget to check out Noyack Wealth Weekly, here’s my Shameless plug, the number one wealth personal wealth management newsletter for Millennials and gen Z and for more expert insights tailored to you, the next generation of investors, until next time stay informed, stay empowered and take control of your financial future.
