Buying a home with your significant other – How to shield yourself against the unknown

Traditionally, a young couple becomes engaged, carefully saves a down payment, and purchases their first home.  In recent decades, this tradition has become less and less common.  Today, home ownership is anything but traditional and the law has failed to keep pace with societal trends.  The laws enacted to protect the “family home” are more likely than not available to persons purchasing homes with a significant other, which means appropriate planning is not only wise, but essential.

One of the greatest protections available to married persons is ownership of property as Tenants by the Entirety.  By owning property in this manner, neither party may take any action which affects the rights of the other owner without consent (a husband cannot mortgage the property without his wife’s signature).  Unfortunately, only married persons can own property in this manner.  Therefore, unmarried persons must carefully choose the appropriate type of ownership, and take contractual safeguards to protect his or her financial investment. 

Unfortunately, divorces are a reality and affect the ability of each party to maintain the family home.  However, the law provides married persons with specific protections through support and equitable distribution which are unavailable to non-married persons.  Therefore, specific plans are essential to prescribe what occurs if one party decides to end the relationship.  Who retains ownership of the home?  How is the value of the home decided?  Can the person remaining in the home afford the mortgage?  Can you leave the home if your name is on the mortgage?  Can your partner simply sell his or her share of the home to a third party?  The lack of careful planning can place your entire financial investment in jeopardy. 

Moreover, what happens if your partner predeceases you?  Unlike married couple, the laws concerning estates and taxes are much more complex and unfavorable to unmarried couples.  Careful estate planning is therefore essential to protect your partner.

While the law creates additional hurdles for non-married persons, buying a home with a significant other can still be a wise investment, both financially and emotionally, with appropriate pre-purchase planning.  The key is to explore the perils and consult a professional to guard against them.