Virginia law has special treatment for couples who are married and own real property together. But what about unmarried couples? Couples often choose to cohabitate without getting married, for a number of diverse reasons. But such couples often have to think more carefully about their expectations for their jointly-owned property at death. Here are some practical and planning considerations for unmarried couples who own their home (or other real estate) together.
- Titling: Unmarried couples can own real property one of two ways. If they own property as “tenants in common,” each person has the right to transfer his or her interest to a third party, both during life and at death. However, if the property is owned as “joint tenants with the right of survivorship,” at the death of the first person, the survivor automatically owns the entire property. Therefore, couples should consider which result they prefer and confirm that the property is appropriately titled. If not, the title can be corrected by deed.
- Contributions: If each person intends to leave his or her interest in the property to his or her heirs outside the relationship, another consideration is whether their interests should be considered equal. For example, if each party contributed half of the cost of the property and each pays for half of any necessary repairs or improvements as they arise, a 50/50 division is appropriate. However, if one party contributes more of the purchasing price, or later pays to replace the roof or add a garage, the couple may want to adjust their respective interests to reflect this. If this is the intention, the couple should keep very clear records of each party’s contribution to the value of the property so that their estate planner, executor and/or trustee, and heirs understand the proper division.
- Contents: In situations where unmarried couples cohabitate, division of the real estate itself is not the only source of confusion. Generally, it is not obvious to outsiders which tangible personal property (such as art, furniture, and other household items) belongs to which person. This means it can be difficult for heirs and fiduciaries to determine which items should remain with the survivor and which ones are part of the decedent’s estate. Therefore, it is a good idea to keep a list of which items belong to whom, or at least to use a list or memorandum of specific items to go to specific heirs at each individual’s death. The list is incorporated into the individual’s will but can be updated or replaced as often as desired, without the need to change the person’s entire will.
- Marriage: Unmarried couples who acquired real property together may later decide to tie the knot. In that situation, it’s best for the couple to revisit the issues listed above to determine whether their thinking has changed about the best treatment. Married couples may wish to own their real property as “tenants by the entirety,” a type of title that incorporates special creditor protection. Married couples also have certain statutory entitlements that can only be waived by contract, so it might be appropriate to discuss making a premarital agreement to memorialize the couple’s intentions if they are keeping track of their respective contributions to the value of the property.
If you have questions about record keeping, titling, estate planning, or premarital agreements, call us now! It’s better to get organized now than to have your fiduciaries trying to guess at your intentions after the fact.