Cohabitation without marriage is becoming more common in the United States. Among 18 to 44 year olds, the percentage of adults who have lived with an unmarried partner at some point is now higher than the percentage of adults who have been married.
When you live with a romantic partner, it may feel as though you share everything. And to some extent, this may be true, legally speaking. For example, there is a trend toward unmarried couples buying homes together. While this might make economic sense, especially at a time when household budgets are being stretched, it can also create legal complications.
Gifts that are given purely out of affection can create unintended consequences as well. This includes gift taxes and the relinquishing of control over the gift once it is accepted. Your heart might be in the right place, but without understanding gifts and joint ownership, you could be making a decision that you will come to regret.
Unmarried Partners and Cohabitation: A New Norm
Decades ago, it was rare—and even scandalous—for unmarried couples to live together. However, like many aspects of American life, this is changing.
Over the last two decades, the number of unmarried partners living together has almost tripled from 6 million to 17 million. Among young adults ages 18 to 24, cohabitation is now more common than living with a spouse. Among adults ages 18 to 44, 59% have cohabitated as compared to 50% who have ever been married. Since 2002, the share of U.S. adults who are married is down. Over the same period, the share of adults living with an unmarried partner has more than doubled.
As marriage and cohabitation trends change, Americans are becoming more accepting of unmarried couples living together, according to Pew Research Center. In addition, some arrangements that were previously only available to married couples, such as car insurance, have been extended to unmarried couples. Today, most insurers allow a significant other (e.g., a boyfriend, girlfriend, domestic partner, or fiancé(e)) to be added to a car insurance policy.
Sharing a single auto insurance policy with a domestic partner can save both of you money on premiums. However, if your significant other has a bad driving history or they get into an accident on a policy that you share, it could increase your rate.
Joint Ownership and Unmarried Couples
As the number of cohabitating partners has increased, so has the number of unmarried couples buying homes together. According to the National Association of Realtors, 9% of homebuyers in 2020 were unmarried.
Although it might make financial sense to buy a home together, a property that is jointly owned by both partners presents legal risks and obligations to each co-owner. These same risks and obligations can arise if one partner already owns a home (or another asset) and adds their partner to the title.
First, adding another person to the title of a property can trigger gift tax consequences in states in which the joint owner does not have the right to sever their interest. In such states, the gift is typically valued at half of the property's value. If the value of the gift is over the annual gift tax exclusion amount ($17,000 in 2023), then a gift tax return will need to be filed by the person giving the gift (i.e., the original owner). Due to the high lifetime estate and gift tax exclusion amount ($12.92 million in 2023), it may be unlikely that any gift tax would be owed; however, the value of this gift will be deducted from the giver's lifetime exclusion amount at their death.
In addition, once a joint owner is added to the property, that property can immediately be susceptible to the new joint owner's creditors. Obviously, this has implications for the original owner if a new joint owner's creditor goes after the now jointly owned property to satisfy the debt.
Finally, depending on how the property is titled, unmarried partners who buy a home together could inherit each other's share of the property automatically. This happens when the property is deeded to the new owners as joint tenants with right of survivorship. The following alternatives to joint tenancy do not trigger survivorship rights:
- the owners holding the property as tenants in common;
- having a trust own the property, with the nonowner partner having a right to occupy the property for a designated period of time; or
- creating a limited liability company (LLC) to own the property with a retained right of occupancy for the surviving owner (however, the LLC may not qualify for homeowner's exemptions for real estate tax purposes).
A cohabitation property agreement that protects each partner's property interests should also be considered. An agreement of this type can include a dispute resolution process, an exit strategy, a buyout agreement, and a plan for account and property division if and when the couple splits up.
Unmarried Couples and Gifts
Love can make people act irrationally. Somebody might be convinced that they have met the love of their life, and this can prompt them to make decisions they regret in hindsight. “Look before you leap” is good advice when considering marriage. But prior to marriage, “Think before you gift” is equally applicable.
Gift has a specific legal meaning rooted in contract law. It is something that is transferred from one person to another for a nonbusiness reason and without compensation. A few conditions must be met to make a gift valid:
- The person giving the item intends it as a gift;
- The giver actually delivers the gift to the receiver (and does not simply promise to do so at some point in the future); and
- The receiver accepts the gift from the giver.
If a gift meets these requirements, contract law recognizes it as a valid gift. As a result, the gift is enforceable and, in most cases, it cannot be taken back. That is, once a gift is successfully made, the giver loses control over the gifted money or property.
Gifting an object of relatively little value probably will not be a big deal in the event of a breakup. It is unlikely that somebody will ask for a birthday or Christmas present back so they can return it for a refund. But if the gift is something large—like joint ownership in a property— major issues can arise.
Imagine that you add your partner to the title of your house so that legally, half of the house is theirs. After a split, they are unwilling to return their share to you. To get it back, you would have to buy it from them. But what if they do not want to sell it to you? Alternatively, they could buy your share or they could sell their share to another party. They could also petition the court to perform a forced sale of the property and distribute the proceeds among the two of you, or ask the court to partition the property. In any case, these are probably not scenarios you would have agreed to if you had thought through your gift of joint tenancy ahead of time.
A house is a dramatic example of the perils of gifting, but the same legal considerations apply to any gift, with the possible exception of an engagement ring. Because it is a conditional gift that is predicated on a future event taking place, the giver may have the right to get the engagement ring back if the future event (the wedding) does not take place. However, courts have taken different views of this issue, and it could come down to the specifics of the broken engagement.
Love and the Law: It Is Okay to Ask Questions
Even though cohabitation without marriage is more popular than ever, unmarried couples still do not have all the legal protections that married couples enjoy. You might be certain that you have met “the one,” and you may be right. But before you hand over the keys—literally and figuratively—to another person, or sign on the dotted line with them, there is no shame in talking to a lawyer about how to protect yourself. If you have any questions about how to gift property to your significant other, please contact us.
 Benjamin Gurrentz, Unmarried Partners More Diverse Than 20 Years Ago: Cohabitating Partners Older, More Racially Diverse, More Educated, Higher Earners, U.S. Census Bureau (Sept. 23, 2019), https://www.census.gov/library/stories/2019/09/unmarried-partners-more-diverse-than-20-years-ago.html.
Benjamin Gurrentz, For Young Adults, Cohabitation Is Up, Marriage Is Down: Living with an Unmarried Partner Now Common for Young Adults, Census.gov (Nov. 15, 2018), https://www.census.gov/library/stories/2018/11/cohabitation-is-up-marriage-is-down-for-young-adults.html.
 Juliana Menasce Horowitz et al., Marriage and Cohabitation in the U.S., Pew Research Center (Nov. 6, 2019), https://www.pewresearch.org/social-trends/2019/11/06/marriage-and-cohabitation-in-the-u-s/.
 Car Insurance for Unmarried Couples, Progressive, https://www.progressive.com/answers/car-insurance-for-unmarried-couples/ (last visited Oct. 25, 2022).
 Kate Dore, Buying a Home Unmarried? What to Know Before Signing the Deed, CNBC (Nov. 5, 2021), https://www.cnbc.com/2021/11/05/buying-a-home-unmarried-what-to-know-before-signing-the-deed.html.
 Thomas J. Stemmy, Creating Joint Ownership: Avoiding the Tax Trips and Other Pitfalls, J. Acct. (Jan. 31, 2009), https://www.journalofaccountancy.com/issues/2009/feb/creatingjointownership.html.
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