When is it important for an unmarried couple to make a written property agreement?

If you haven't been together long and don't own much, it's really not necessary to make a written agreement. But the longer you live together, the more important it is to prepare a written contract making it clear who owns what -- especially if you begin to accumulate a lot of property. And, if you buy a house together, it's a good idea to create a property agreement.

If you don't create a property agreement, you might face a serious (and potentially expensive) battle if you split up and can't agree on how to divide what you've acquired. And, when things are good, taking the time to draft a well-thought-out contract helps you clarify your intentions.

What should a property agreement include?

You can tailor your property agreement to meet the needs of your relationship. The major areas of concern for most unmarried couples are:

• how property and assets are owned, and
• whether or not income and expenses are shared.

Some couples choose to keep all property owned -- a car, a house, furniture, and the like -- completely separate, while others choose to share some or all of their property by transferring part ownership to each other. You can also specify how you will own property that you acquire during your relationship. (If you decide not to prepare a comprehensive property agreement that covers this issue for all of your property, you can use a "joint purchase agreement" for major items as you buy them.)

Similarly, you may use your agreement to share or divide income and expenses in any number of ways. You can keep separate bank and checking accounts, credit cards, and insurance, or you can agree to handle some or all of these things jointly.

In your agreement, you may also want to decide in advance who gets what should you separate, or agree to a process for resolving any property disputes that arise if you part ways.

My partner makes a lot more money than I do. Should our property agreement cover who is entitled to her income and the items we purchase with it?

Absolutely. Although each person starts out owning all of his or her job-related income, many states allow this to be changed by an oral contract or even by a contract implied from the circumstances of how you live. These types of contracts often lead to misunderstandings during a breakup. For example, absent a written agreement stating whether income will be shared or kept separate, one partner might falsely claim the other promised to split his income 50-50. Although this can be tough to prove in court, the very fact that a lawsuit can be brought creates a huge problem. For obvious reasons, it's an especially good idea to make a written agreement if a person with a big income is living with and supporting someone with little or no income.

Example: Jon and Rose plan to buy a fixer-upper house and move in together. Jon is a carpenter; Rose is a university professor who makes nearly twice as much as Jon. Jon and Rose plan to own their home equally, so they agree in writing as follows: Rose will pay two-thirds of the mortgage, and Jon will pay one-third. Rose and Jon will equally pay for the materials to fix up the house, and Jon will contribute all the labor. Rose and Jon also agree to equally own all the property, furniture and fixtures they buy once they move in together.

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