Before jumping into a big financial commitment with your sweetheart, consider the implications that some of those actions might have for you long term, especially purchasing real estate together. While it may seem like a solid financial decision at the time, and another stepping stone in moving towards permanence in your relationship, if something goes sour this can be a dangerous investment that will end up costing you far more than it ever gained. Here is a quick look at some of the risks that can be associated with owning a home with a partner while you are unmarried.
How the Deed is Held: This is one of the biggest issues to consider when going into buying a property with an unmarried partner. Unless you specify on the deed how your relationship will work in the ownership of the home, it will be default have you defined as tenants in common. This means that you both have a full 50% undivided interest in the property, which will complicate things should the relationship change in anyway.
If You Separate: While not something you’d like to be planning for when discussing property ownership with a partner, it is always a reality and just because you wouldn’t have divorce paperwork to sort through doesn’t mean that your split will not be financially messy. This becomes doubly true if you own property together. If you are registered as tenants in common, your partner can legally choose at any time to transfer their share of the home to another individual, and can mortgage it as well without notice or consent.
If Someone Dies: Even more troubling, if your partner should die and you are still listed as tenants in common on the property that you co-own, you will not be entitled to any sort of inheritance or consideration when legally passing their share of the property on to their designated family members or other heirs. If this is not something you are completely comfortable with, you should absolutely consider other options of entering into the property owning business together.
Other Options: Other than tenants in common, the better way for you and your partner to enter into this new financial relationship is as joint tenants, in which you both possess an undivided interest in the property as a whole. If your partner should die, you would then be in possession of the whole estate, much more likely what you were anticipating when purchasing the property. Separation should still be spelled out in a legally binding agreement so you have a plan mutually agreed upon for what you would do if you later break up.
Consultations Matter: Before entering into such a hugely binding financial investment such as this one, it is important to consult with a lawyer about your options and how to best protect your property. For a free consultation about my experience about making a real estate purchase, contact me, John L. Schettino today at 201-498-9768 today to learn more.