Why a cohabitation agreement is important for you

Why should we create a notarial cohabitation agreement? Does it make sense if we decide to get married later? Can we make some mutual agreements instead of a cohabitation agreement? These are questions that arise for cohabiting couples who are not (yet) married or have not (yet) entered into a registered partnership.

Of course, unmarried cohabitants can make verbal agreements or draw up a written contract themselves, without involving a notary. The problem with this, however, is that it's more difficult to prove exactly what was agreed upon. This is different if a cohabitation agreement is drawn up by a notary. A notarial cohabitation agreement offers even more advantages, including tax benefits. For several reasons, it's wise to have a notarial cohabitation agreement drawn up when you're living together. This also applies if you plan to get married in the future.

A cohabitation agreement in a notarial deed, a wise choice!

When the agreements between cohabiting parties are recorded in a notarial deed, this offers several advantages. For example, before signing the cohabitation agreement, the notary will provide thorough information about the agreements that can be made between cohabiting parties. This includes agreements regarding the home (especially if it is in the name of the same person) in the event of separation or death, contributions to the household budget, and any alimony arrangements (there is no alimony obligation by default). The notary can also advise you on the merits of taking out life insurance to pay off part of the mortgage in the event of the breadwinner's unexpected death.

If these agreements are recorded in a notarial deed, the added benefit is that such a deed has what's known as "enforceable force." This means you don't first have to go to court to have the agreements in a notarial cohabitation agreement executed. Pension companies also almost always require partners to have a notarial cohabitation agreement if they want to designate each other as pension beneficiaries.

Want to save on inheritance tax? A notarial cohabitation agreement can be important!

Cohabitants do not inherit from each other; make a will!

Cohabiting partners are considered "strangers" under the legal regulations that determine who inherits from whom. This means that, in principle, cohabiting partners cannot inherit from each other, even if they have been living together for years. If unmarried cohabiting partners do wish to inherit from each other, this can only be done by making a will in which the partner is appointed as heir or legatee.

Save inheritance tax with a notarial cohabitation contract

Cohabiting partners are also essentially "strangers" for inheritance tax purposes. This means that, upon the death of the other partner, one partner has only a small inheritance tax exemption of approximately €2,000, while spouses, for example, have an exemption of €660,000! Moreover, any remaining inherited assets are subject to a much higher tax rate (30% or 40% inheritance tax) than if spouses inherit from each other (spouses have a 10% or 20% inheritance tax rate).

If certain conditions are met, cohabitants can be considered "fiscal partners" for inheritance tax purposes. In that case, as with spouses and registered partners, the high exemption of approximately €660,000 and the low rate of 10% or 20% apply. To qualify, cohabitants must:

• both are of legal age;
• be registered at the same address in the Municipal Personal Records Database;
• have established a mutual care obligation in a notarial cohabitation agreement. This means that the cohabitants must have agreed to provide for each other's livelihood;
• not be (grand)parent-(grand)child of each other;
• You must not also meet all the above conditions with someone else. This can happen, for example, if you are living with a third person. In other words, for inheritance tax purposes, you can only be a partner with one person at a time.

Only if the cohabiting partners meet all the aforementioned conditions for at least six months prior to the death are they considered tax partners for inheritance tax purposes. Incidentally, the requirement for a notarial cohabitation agreement is not a strict requirement. If cohabiting partners do not have a notarial cohabitation agreement, but do meet all the other conditions and have been registered at the same address for five years, they are also considered tax partners.

Other reasons why a notarial cohabitation contract is important

As briefly mentioned above, the cohabitation contract is an instrument in which agreements between cohabitants can be properly recorded, with the aim of ensuring that a number of matters are properly arranged in the event of separation due to a dispute or death.

Consider agreements about household expenses: what are these costs? Will each person share the cost equally, or will they be paid proportionally based on income? And what exactly is considered income?

It's also wise to make arrangements for shared homes: does one partner owe the other a debt if the other paid a larger portion of the purchase price or financed a renovation? Does that potential debt rise and fall with the value of the house?

A notarial cohabitation agreement can further specify the circumstances in which the partnership ends. How do you prove who owns what? Is there financial compensation, a kind of alimony, if the partners separate? And does one partner have the right to take over the other's belongings upon their death, with or without payment of their value?

Summary and tip

Are you living together without being married? Then it's wise to draw up a notarial cohabitation agreement, even if you plan to get married in the future. When the agreements between cohabitants are recorded in a notarial deed, it offers several advantages, such as being able to claim each other's pension rights and saving on inheritance tax. Drafting a cohabitation agreement requires a tailored approach, especially if you have different assets, established careers, and joint or unjoint children.

Would you like more advice on this topic? Visit us or give us a call. An initial (phone) consultation is free. To schedule an in-office meeting or a video call, please call +31 (0)10 44 53 777. We look forward to seeing you.







This article is taken from 'Met Recht Geregeld' (www.metrechtgeregeld.nl), a product of FBN Juristen.

This article should not be considered legal advice. FBN Lawyers and MAES Civil-Law Notaries take the utmost care in the content of these articles, but accept no liability for any incompleteness or inaccuracy of an article, nor for any consequences thereof.