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1. If you are cohabitating, your assets are at risk. Following a break-up, a cohabitating domestic partner can successfully bring a claim for compensation for contributions made during the relationship. Consider a situation where one partner obtains significant growth in assets and/or income during a period of cohabitation. If he or she has benefited substantially from the homemaking, housekeeping, or financial contributions of a domestic partner, the domestic partner can successfully bring a claim for compensation.
2. Palimony – Will you have to pay? Alimony refers to sustenance paid by a husband or wife, to the other, following divorce. Palimony means alimony payments arising out of a non-marital relationship and refers to support or maintenance following a break-up, as opposed to compensation for services performed. Indiana Courts have held that palimony is invalid as contrary to public policy. Consider a situation where one domestic partner has considerably higher income and/or wealth than the other. If the relationship ends, the partner of lesser means may experience a drastic decline in lifestyle and will not be entitled to maintenance or support under Indiana law. But, is this always good news for the wealthier partner? Read on!
3. Are you likely to be sued by your partner? Consider the couple in #2 where one domestic partner has considerably higher income and/or wealth than the other. The longer the relationship lasts, the more accustomed the less wealthy partner becomes to a higher lifestyle. If the relationship ends, the less wealthy partner may have a significant decrease in social and financial status. This situation could provide motivation for a claim for compensation for services as set forth in #1 above!
4. How will a Court decide if my domestic partner can sustain a claim? Courts will evaluate domestic partner claims for compensation by considering whether one partner has been unjustly enriched by the services of the other. Cohabitation, by itself, does not give rise to a presumption of shared property rights. Relevant factors include, but are not limited to, the parties’ intention to pay and expectation to be paid (i.e. were services performed gratuitously), the nature and reciprocity of services performed, and the relative benefit conferred by the specific services performed. Because case law in this area is limited, and the dynamics of every relationship are unique, it is impossible to set forth bright-line rules of recovery.
5. The SOLUTION: How to bring clarity to your relationship. A properly drafted Cohabitation Agreement can provide protection of your assets, clarify your financial obligations, and bring peace of mind in your relationship. Just as married partners are free to enter into pre- or post-nuptial agreements, unmarried domestic partners are free to do the same. A Cohabitation Agreement can define which assets are to remain separate and those that will be shared, whether household chores are to be performed gratuitously or with expectation of compensation, and whether either party has a right to increased wealth by the other during the period of cohabitation. It is hard to argue against the proposition that cohabitating partners should define the terms of their relationship, and not a judge. Fortunately, a properly drafted Cohabitation Agreement can secure that right. |
