Congratulations! You’re graduating from college, and you’ve met the love of your life! You may think now is a great time to move in together, or maybe even tie the knot. Have you thought about the legal consequences of making such heartfelt decisions? You should!
Students graduating from college, especially those who go on to graduate school such as medical or law school, should consider having a legal agreement with their significant other if they choose to live together or get married. After all, students tend to be riddled with debt that may take a long time to pay off, and the decisions made at this stage in the relationship will have a lasting effect on their financial future.
We’re just living together. Why do we need an agreement?
When you begin cohabitating with your significant other, you meet the first prong required for a “common-law marriage.” In Texas under our current laws, it is possible to be married to someone without ever having any kind of a formal marriage ceremony. This is known as a “common law marriage.” Specifically, the marriage may be validated by evidence that the couple: 1) agreed to be married, 2) lived together in Texas, and 3) represented to others that they were married. “Okay,” you may think. “We did not intend to be married, and never held ourselves out as being married.” But it is not as simple as that. You may have included your partner on your health insurance benefits, filed a joint tax return together or included your partner as a “spouse” on a health club membership. These are the type of factors that are taken into account when someone who has been living with a partner decides to separate and file for divorce. A “common law marriage” can have significant ramifications on your property rights if you’re not careful.
To avoid “common law marriage,” and clarify the rights and responsibilities of living together, many couples choose to enter into a “Cohabitation Agreement” which spells out their rights and responsibilities, and specifically allows the couple to “opt-out” of a common-law marriage. So, if you decide to get married, you agree that it will be a formal ceremony that initiates the marriage relationship.
Dealing with Student Debt After Marriage
Below is a brief discussion of the ways in which student loan debt may impact the marital estate:
1. Paying off the other spouse’s student loan debt: It is important to note that under the Texas Family Code, a spouse who pays off the other spouse’s student loan debt during the marriage is not entitled to reimbursement. So if you use the inheritance your grandmother left you to pay off your beloved’s student loan debt, you won’t recoup that in the event of a future divorce. However, if you decide to pay off the unsecured credit card debts that your partner incurred before marriage, you may be able to request reimbursement in the event of a death or divorce if you keep clear records.
2. Be wary of incurring student loan debt to pay living expenses: A couple who decides to take advantage of subsidized student loans to pay their living expenses during the marriage is creating a debt for which the community property estate (meaning both of you) is liable.
3. The debt will stay with the person who contracts for the debt: If you take out debt to pay for your spouse’s education, be mindful that the debt will belong to you in the event of divorce. Even if the divorce decree awards that debt to your spouse, the creditor will look to you to satisfy the debt.
Future spouses should be clear about what will happen to any debt should a separation occur.
Premarital Agreements Can Give You the Power (Not the State of Texas)
Premarital agreements allow couples to design their own rules for marriage, to address how they will handle ongoing expenses and liabilities, as well as to clarify expectations for use of assets acquired during the marriage. Without a premarital agreement in place, the State of Texas has made these decisions for you, which is why it is wise to visit with a family law attorney to learn your rights and responsibilities before you say “I do.”
Plan for the Future
These are just a few scenarios of the issues that can arise when you live together or marry right after graduating from college. The bottom line is that students about to get married or cohabitate need to plan for the future, taking into account a wide variety of possible scenarios, to protect themselves and the growing relationship. A smart first step is to consult with a professional attorney who can identify possible challenges, propose constructive solutions, and help them navigate this next step in their life journey. At Hargrave Family Law, we’re here to help.