You better think
Why?
Why should we even make a notarial cohabitation agreement and/or a will? Does it even make sense if things are going well between us and we might even want to get married later? Instead of having a notary draw up a cohabitation agreement, couldn't we just agree on something ourselves? That's nice and easy and free.
These are questions we often hear from cohabiting couples who are not (yet) married or in a registered partnership. We explain to them that by entering into a notarial cohabitation agreement and making a will, they will often earn money, rather than having it cost them anything. Of course, there are always those who prefer to send their valuable money to the government, because our government can also use the money.
Free of form
Of course, unmarried cohabitants can make verbal agreements about the property rights of cohabitation themselves, without involving a notary, or draw up a written contract and simply write anything down. No problem! You can even write "cohabitation agreement" above it, in capital letters, boldface, and underlined. Because a cohabitation agreement is free of form. However, in that case, it's more difficult to prove when and what exactly was agreed between you. And that causes problems if things do go wrong between you. Either you've arranged the wrong things in that contract, or you've arranged the right things incorrectly. Because you don't know or understand the legal system properly. This can be prevented if the notary helps you with the cohabitation agreement.
Education
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 benefit of taking out life insurance to pay off part of the mortgage in the event of the breadwinner's unexpected death.
Executory power
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
Pension companies also almost always require partners to have a notarial cohabitation contract if they wish to appoint each other as pension beneficiaries.
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.
Willie Wilkerson, the retired firefighter and unmarried partner of Queen of Soul Aretha Franklin, who died far too early in 2018, experienced this firsthand. After sharing 35 years of joy and sorrow with Aretha, he was forced to discover, to his unspeakable grief and horror, that no will had been made after her death. He realized that a cohabitation agreement had never been drawn up, leaving him empty-handed and without any of the hundreds of millions he received. After her death, he had to take legal action against Aretha's children from previous relationships, putting unnecessary strain on his family relationships. It later emerged that handwritten notes from Aretha had been found that could be considered a will under Michigan law, and that could change everything. In the Netherlands, such a handwritten note would never be considered a will. In the Netherlands, you always have to go to a notary for a will. Willie died in April of this year from the coronavirus (COVID-19). His heirs are expected to continue the battle over the inheritance.
Save inheritance tax with a notarial cohabitation contract
Cohabiting partners are also considered "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;
- not also meet all the above conditions with someone else. This can happen, for example, if you live 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 unmarried? 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 inheritance tax. Drafting a cohabitation agreement requires a tailored approach, especially if you have different assets, established careers, and joint or unjoint children. Let us advise you on this. We'll tell you the whole story of Aretha Franklin and Willie Wilkerson and discuss with you whether making a will is wise in your situation.
Come by or give us a call. The consultation is free. To schedule an in-office consultation or a video call, please call +31 (0)10 44 53 777. We look forward to seeing you. Curious already? Then read this article in the New York Times.
"You better think".
This article is taken from 'Met Recht Geregeld' (www.metrechtgeregeld.nl), a product of FBN Juristen.
Why should we even make a notarial cohabitation agreement and/or a will? Does it even make sense if things are going well between us and we might even want to get married later? Instead of having a notary draw up a cohabitation agreement, couldn't we just agree on something ourselves? That's nice and easy and free.
These are questions we often hear from cohabiting couples who are not (yet) married or in a registered partnership. We explain to them that by entering into a notarial cohabitation agreement and making a will, they will often earn money, rather than having it cost them anything. Of course, there are always those who prefer to send their valuable money to the government, because our government can also use the money.
Free of form
Of course, unmarried cohabitants can make verbal agreements about the property rights of cohabitation themselves, without involving a notary, or draw up a written contract and simply write anything down. No problem! You can even write "cohabitation agreement" above it, in capital letters, boldface, and underlined. Because a cohabitation agreement is free of form. However, in that case, it's more difficult to prove when and what exactly was agreed between you. And that causes problems if things do go wrong between you. Either you've arranged the wrong things in that contract, or you've arranged the right things incorrectly. Because you don't know or understand the legal system properly. This can be prevented if the notary helps you with the cohabitation agreement.
Education
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 benefit of taking out life insurance to pay off part of the mortgage in the event of the breadwinner's unexpected death.
Executory power
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
Pension companies also almost always require partners to have a notarial cohabitation contract if they wish to appoint each other as pension beneficiaries.
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.
Willie Wilkerson, the retired firefighter and unmarried partner of Queen of Soul Aretha Franklin, who died far too early in 2018, experienced this firsthand. After sharing 35 years of joy and sorrow with Aretha, he was forced to discover, to his unspeakable grief and horror, that no will had been made after her death. He realized that a cohabitation agreement had never been drawn up, leaving him empty-handed and without any of the hundreds of millions he received. After her death, he had to take legal action against Aretha's children from previous relationships, putting unnecessary strain on his family relationships. It later emerged that handwritten notes from Aretha had been found that could be considered a will under Michigan law, and that could change everything. In the Netherlands, such a handwritten note would never be considered a will. In the Netherlands, you always have to go to a notary for a will. Willie died in April of this year from the coronavirus (COVID-19). His heirs are expected to continue the battle over the inheritance.
Save inheritance tax with a notarial cohabitation contract
Cohabiting partners are also considered "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;
- not also meet all the above conditions with someone else. This can happen, for example, if you live 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 unmarried? 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 inheritance tax. Drafting a cohabitation agreement requires a tailored approach, especially if you have different assets, established careers, and joint or unjoint children. Let us advise you on this. We'll tell you the whole story of Aretha Franklin and Willie Wilkerson and discuss with you whether making a will is wise in your situation.
Come by or give us a call. The consultation is free. To schedule an in-office consultation or a video call, please call +31 (0)10 44 53 777. We look forward to seeing you. Curious already? Then read this article in the New York Times.
"You better think".
This article is taken from 'Met Recht Geregeld' (www.metrechtgeregeld.nl), a product of FBN Juristen.
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