Cohabitation agreements and marriage contracts (or “prenups”) are common contracts for couples to enter into prior to moving in together or getting married. Reasons for wanting one of these contracts include the following:
- a couple is purchasing a home together and one person is putting down a larger down payment than the other,
- one partner has gotten a gift or loan from their family to put towards the existing or soon-to-be joint home,
- one person has a home in their own name and their partner is moving in with them,
- one or both of the parties have assets in their name that they want to protect, like a business or a pension,
- the couple is getting married and there are various assets being brought into the marriage,
- it is a second relationship or marriage for one or both of the parties and they want to protect themselves.
While more peoples’ minds are turning to these agreements, it is still common for the actual preparation of these to fall to the bottom of the to-do list. The reality is, however, that this should be moved up the task list.
While they might seem straightforward, these contracts take – and need – time. It is suggested that a couple have their contract prepared well in advance of important dates like a move-in date or a wedding day for various reasons:
- The agreement needs to be drafted after one person gives their instructions to their lawyer on a number of issues. These can include how they want their assets and debts to be dealt with in a separation or in the event they pass away, what they want to happen with their home, and what type of plan they want to set out for supporting a spouse.
- Income disclosure needs to be exchanged between the parties.
- Financial disclosure of respective accounts, investments, pensions, businesses, debts, et cetera, needs to be exchanged between parties.
- The other party needs time to review the draft and have the opportunity to get a lawyer of their own.
- Time is needed to revise, update and finalize the agreement.
- A buffer is needed between any important dates like an upcoming wedding date so that there is reduced risk of someone claiming that they were signing the contract because they felt they were under pressure or stress to sign it in time.
Typically, if you are within a month or so of an important date, the risks increase that there will not be enough time to finalize items comfortably. Proceeding in such a way may raise flags with your lawyer and may lead them to have to advise you against signing the contract. Finalizing it despite this may be against your lawyer’s advice and may also increase your risks down the road should the agreement be challenged.
While it can seem like something that can be put off to the last minute, it is recommended that you give yourself at least a few months to get one of these agreements in place.