Protecting a Blended Family with a Property Agreement
When families are blended, a couple needs to look out for the rights of each's natural and step children. A Revocable Living Trust can set out the guidelines of how to distribute the assets to either the survivor or to the the deceased person's children or some combination of both. However, even if a couple creates a Revocable Living Trust together, either one can unilaterally change the terms regarding half of the assets. Therefore, it makes sense for a couple to have a property agreement which can only be changed if both agree.
When a couple is married, the property agreement is referred to as a "post-nuptial agreement." If a couple enters into a property agreement before marriage, the property agreement is called a "pre-marriage agreement." If the couple are cohabiting and not planning to marry, then the agreement is referred to as a "domestic partnership agreement." The terms of these agreements are generally similar and are executed with similar disclosures and representations. However, the statutes and case law that address property agreements normally reference pre-marriage agreements specifically and are applied to post-marriage agreements and domestic partnership agreements by analogy.
These property agreements are not "exit strategies" as they are often portrayed in the media. The goal of the property agreement is that the partners feel comfortable living together; neither feeling vulnerable to losing interest in jointly owned property or relied upon income. These agreements can make sure that estate planning documents, such as a Will or trust, do not have unrealistic goals, and that the survivor is protected as well as the children.
Also, the agreement of how the couple pays expenses and shares accounts can be addressed. This protects both persons in the relationship if one becomes incapacitated and uninformed family members try to change the use of funds or how a business is owned.
Along with the property agreement, the couple should also be sure to have powers of attorney to clarify who has authority to handle issues of finance or health if one of the couple becomes ill or incapacitated.