Over the past half century, premarital cohabitation has increasingly become a preferred—some might even argue necessary—step along the way to tying the knot. In 1960, roughly 450,000 unmarried couples lived together; now that number exceeds 7.5 million. A 2001 survey from the National Marriage Project showed that nearly half of twenty-somethings agreed with the statement “You would only marry someone if he or she agreed to live together with you first, so that you could find out whether you really get along.” What was once considered debauched now appears to be approaching norm status.
The decision to cohabit before marriage may carry with it unintended consequences in the unfortunate event of divorce. Many cohabiters assume that not being married means their respective property remains separate. They may further assume that property that improves or grows in value during cohabitation won’t be considered at all when it comes time to for a divorce court to divide marital assets. It’s important to know that these assumptions may not prove to be true.
A common example of growth in property during cohabitation is a retirement account, like a 401(k) or IRA, that a party contributes to while cohabiting. The 2010 Oregon Court of Appeals case Carlson and Carlson squarely addressed how divorce courts should treat premarital property that grew in value during the cohabitation period. Since the growth took place outside of the duration of the marriage, courts may not account for the growth during the dissolution process at all. Courts will look to the express or implied intent of the parties during the cohabitation period. If the evidence shows that the cohabiting parties intended to pool their resources for a common benefit with respect to the property, the court will divide the property accordingly. If, however, there is no evidence that the parties intended to pool their resources during the cohabitation, the court may decline to divide the property in question.
But there’s a catch—and it’s a big catch. Even after making all of these determinations, a divorce court is ultimately charged with ensuring that the division of property is “just and proper in all the circumstances.” This is a broad standard, and it allows courts a significant amount of latitude in determining which facts to consider under what is “just and proper.” This can include considering the growth of property during the cohabitation period, even though it is by definition not “marital.” So while a spouse may not be entitled to half of that huge spike in value of your 401(k) during the cohabitation years, the court might still consider that huge spike when deciding how divide property in a “just and proper” fashion.
If the foregoing seems complicated or confusing, don’t lose heart. The professionals at Stahancyk, Kent & Hook P.C. are ready to speak with you about this and any other matter relating to divorce and estate planning.