Pre-nups, Co-ownership and Real Estate

Metro®Boston, Publication Date: August 24, 2011
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By Attorney George Warshaw

“Honey, I love you, but would you mind signing this little piece of paper for me?”

Relationship don’t always last forever, despite the best of intentions.

If you’ve been married before, broaching the subject of a pre-nuptial or a co-ownership agreement with a partner or future spouse is more the norm than the exception. It should not be overlooked in any relationship when planning for the future, especially if one person has real estate, substantial assets, or a prospective significant inheritance.

In the pre-nup or co-ownership agreements that I do for clients, I suggest simple methods of handling real estate. One way is this (and there are several other ways):

In the event of a divorce or separation, you get back what you put in to buy the property – or your present equity if you are contributing a property that you already own. Anything beyond that (i.e. the increase in value), is split evenly or according to a fair formula that considers everyone’s contributions, past and future.

Here’s an example (it may not be right for you). If you came into a relationship owning a condo consider the equity as yours. If, going forward, both of you make equal contributions towards the mortgage, taxes, insurance and condo fees, then, in the event of a divorce, any increase in the equity over time could be recovered 50-50.

 A variation on this approach is that each person gets back what each paid in to buy the house, pay for improvements and cover core expenses like taxes, insurance and mortgage. Each person’s contributions easily translate into a percentage of investment that can be applied to any profit or loss. While this approach sounds good on paper, this requires a bit of record keeping.

 While there are many ways of dealing with real estate in a pre-nup or co-ownership agreement, what’s often most important is the relationship, and that one person doesn’t feel like they are living in the other’s house. With good planning, that can be easily addressed.

It’s important in any relationship to discuss future finances. A pre-nuptial or co-ownership agreement should just be one of the discussion points. Since “no one suit fits all,” it’s critical to see a lawyer for advice and planning. One simple detail or concern can change the advice you may get.

© 2011 George Warshaw. All rights reserved.

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George Warshaw is a real estate attorney, estate planner and author. He represents buyers and sellers of homes and condos in Massachusetts, and prepares wills, trusts, prenuptial agreements and estate plans. George welcomes new clients and questions at george.warshaw@warshawlaw.com.

Legal Advice: Laws, and court decisions interpreting them, change frequently and this article is not updated as laws change. The content and information contained in this article is neither intended as legal advice nor shall establish an attorney-client relationship. Before making any legal decision, consult an attorney to see how or if the foregoing may apply to your circumstances.

Tags: Estate Planning Attorney, Estate Planning Lawyer