Would a co-habitation agreement override a family trust if my boyfriend dies?

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Would a co-habitation agreement override a family trust if my boyfriend dies?

My boyfriend and I have been living together 2 years. We created a cohabitation agreement instead of getting married because we are investing in real estate together. He is putting up most of the money but I am working hard on the properties and contributing money as well. We bought a house that will easily be worth 4x what we paid when it is repaired. The co-habitation agreement states that if he dies first all of the profit from the sale of the house will be mine. He has a family trust with his kids as beneficiaries. Would the house go into the trust and void our agreement?

Asked on August 23, 2012 under Estate Planning, Indiana

Answers:

Catherine Blackburn / Blackburn Law Firm

Answered 8 years ago | Contributor

Wow, there are several issues in this.  First, let me congratulate you and your boyfriend for taking steps to put your agreement in writing and protect yourselves.  Then, I have to advise you to consult with a lawyer in your state.  No one can answer your question without seeing your boyfriend's family trust, your cohabitation agreement, the deeds to the properties, and any other planning documents you have (such as wills).  Without seeing these documents, I can only make general comments. 

It is unlikely that your boyfriend's family trust would impact your properties unless he took title to the properties in the name of the trust or his will "pours" all of his properties into the trust.  Your cohabitation agreement is probably not a will and would not control who inherits the properties if your boyfriend (or you, fot that matter) dies.  The deeds to the properties might control this depending on how you or your boyfriend took title when you bought them. 

Let me give you an example of what might happen, depending on how the documents are written.  If your boyfriend is the only person named on the deeds, the people named in his will would inherit the properties.  His will might say that "all the rest, residue, and remainder of my estate I give to my family trust."  In that case, properties that were in his name would "pour over" into his family trust.  Your cohabitation agreement could not stop title to the properties from passing to your boyfriend's trust.  You might have a right to sue the trust for the profits on the properties because of your cohabitation agreement, but that would be expensive and may not be very successful. 

My advice to people in your situation is to have what I call a "life plan" drawn up.  This consists of any legal document you and your boyfriend need to make sure that your agreements and wishes are followed if you break up, have disagreements, become disabled, or die.  There are choices in which documents to prepare and how to prepare them.  Just as an example, you could create a limited liability company for your properties.  While you can prepare a will or a power of attorney or even a trust on the internet, I do not recommend it for you.  Making sure that your wishes are followed requires someone to think about it, and computers do not think.

I hope this has been helpful.  I strongly encourage people in similar situations to pay the money for a lawyer to draw up documents.  This is usually much cheaper than having a big mess and big fight later.


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