General explanation cohabitation contract

In a cohabitation contract, arrangements may be made regarding the following topics, among others:

a. care obligation of the partners towards each other

b. own assets

c. joint assets

d. costs of the common household

e. household effects

f. dispute as to ownership

g. termination of cohabitation

h. death

i. right of assumption during cohabitation

j. partner's pension

k. duration

l. alimony

m. mediation

These topics will be discussed further below.

First some information about inheritance tax (formerly called inheritance tax).

As of January 1, 2024, a rate of 10% over the first € 152.368,00 and 20% over the remainder of the acquisition will apply, with an inheritance tax exemption of in principle € 795.156,00 for what one inherits from one's partner, provided that one meets the conditions to be mentioned below.

According to the Inheritance Tax Act, the term partner means (in addition to the non-divorced spouse and registered partner):

• unmarried cohabitants of 18 years and older (not being blood relatives in the direct line)
• who have run a joint household for at least six months; and
• Who are registered in the municipal Basic Registration of Persons (Civil Registry) at the same address; and
• Who have a notarized cohabitation contract that includes a mutual duty of care; and
• who do not meet the above conditions with another person (multiple relationship).

For cohabitants to whom the above does not apply, an exemption of €2,658.00 applies. The inheritance tax rate in that case is 30% on the first €152,368.00 and 40% on the excess of the acquisition.

Care obligation

The cohabitation contract includes the duty of care that is also stated for married couples in Article 1:81 of the Civil Code. The duty of care for the partners can be further derived from the regulation regarding the costs of the common household.

Own assets

The premise is that the assets of each of the partners will remain completely separate.

The cohabitation contract therefore provides that no community of property exists between the partners.

This means that each has their own assets and that each is only liable and responsible for their own debts.

Despite the system of separate assets, it is still possible to be joint owners of certain goods in the following way:

a. in certain cases you can acquire goods together, for example if you buy a good jointly, receive a gift jointly or inherit it jointly;

b. you can stipulate that contents be acquired jointly (see "Contents").

Income concept

The cohabitation contract defines what is meant by income by you.

If a limited income concept is chosen, income is understood to mean: income from employment.

However, if a broad income concept is chosen, the term income also includes rental income, interest and income from shares and/or bonds.

Costs of the common household

The costs of the household are borne in proportion to the income of each of you.

If a limited income concept is chosen, the costs of the household, insofar as the income from employment is not sufficient, will have to be paid from the other income in proportion to this other income.

Should these other incomes also not be sufficient, you will have to contribute to these costs in proportion to your assets.

Life insurance premiums

The cohabitation contract explicitly excludes premiums and single premiums for life insurance, including accident insurance, from the household expenses. Such premiums shall be borne by the beneficiary partner. This provision has the following background.

If a person dies on whose life a risk insurance or life insurance policy was taken out, inheritance tax may be levied on the payment.

The payment is not taxed if no premiums have been withdrawn from the deceased's (the insured's) assets. A number of conditions must be met. With respect to unmarried persons, one of these conditions is that the cohabitation contract must be able to support the construction.

The fact that there is no community of property is not always sufficient in this respect. After all, through the back door, premiums can still be deemed to have come at the expense of the deceased's assets. For this reason, a more detailed regulation is included in the cohabitation contract.

As already indicated, this is only one of the conditions that must be met.

Periodic settlement clause

A periodic settlement clause (also called Amsterdam settlement clause) can be included in the cohabitation contract. This clause implies that annually the total excess income saved by both of you, that is the income not spent on household expenses, will be divided in such a way that each of you is entitled to half of the total of this excess income.

The cohabitation contract -if you have included such a settlement clause- stipulates that the right to claim division lapses if this is not done within five years after the end of the calendar year in question. However, such a clause does not guarantee that the expiration of that period will indeed cause the right to set off to lapse. This is clear from current case law (which, incidentally, was written for periodic settlement clauses between married couples).

In practice, the non-expiration of the right to claim division can lead to major problems because it is difficult to determine what had been saved over all those years and what should therefore have been divided. This problem occurs especially if the partners separate.

You can avoid these undesirable consequences by actually implementing the periodic settlement clause annually.

Contents

In the cohabitation contract you can choose to stipulate that the household goods (which can also include the means of transport), which you now have and which you will acquire in the future, will be joint property.

If you wish, certain household effects can be excluded from the common household effects and therefore remain private, but these household effects must be mentioned on a list attached to the cohabitation contract.

You can also choose to have all household goods (including the means of transport) remain private.

In that case, it is necessary for you to make a list that specifically defines these household goods with an indication of who owns them. In this situation, for an item that you acquire after signing the deed, you can prove to which of you both it belongs by putting the purchase invoice in the name of one of you both and keeping this invoice with the copy of the cohabitation contract.

Property dispute

In case neither of you can prove to whom an asset belongs in ownership, the asset is deemed to belong to both of you, each for half.

Jointly occupied property

In the event that a property is rented by you, you mutually agree to cooperate so that the rental agreement is in the name of both of you.

An arrangement can also be made in case you jointly acquire ownership of a home, or second home. If either of you has put your own money into this home, that partner will have a claim against the other partner equal to the amount that that partner should have contributed.

For example: partners each buy a home for the undivided half for the purchase price of

€ 300.000,00.

A mortgage is taken out for € 250,000.00, while partner A puts € 50,000.00 of his own money into the house.

Partner A then obtains a claim against partner B in the amount of € 25,000.00 (the portion that partner B should have put into the home given the ownership ratio).

Termination of cohabitation

In principle, after the cohabitation is terminated, all common property is divided according to reasonableness and fairness.

A special arrangement is made with regard to the common home. In case one of the parties would like to sell his share in this common home, this partner is obliged to first offer his share to the other partner for acquisition.

If the former partners do not reach agreement on this point, the home must be sold.

Death

A survivorship clause can be included in the cohabitation contract. This clause means that in the event of the death of one of the partners, all common property will from that moment on belong to the surviving partner. The property in question must still be delivered to the surviving partner after death. If the property is an owner-occupied home, a notarial deed is required.

If the cohabitation has lasted less than five years at the time of death, no inheritance tax will be due on what the surviving partner receives as a result of this residence clause, at least according to current legislation.

If society has lasted longer than five years, inheritance tax will be due on such an acquisition. In the latter situation, however, the exemption described above on page 1 applies to the partners.

The consequence of a survivorship clause is that if you die after each other and you do not have children, the assets of the first to die will go via the last to die to the family of the latter.

If you do not want this, it is important that you make wills in addition to this cohabitation contract. Moreover, wills are important if you would like to arrange more things in case you die. This is particularly important if the home you both live in is owned exclusively by one of you and it is your intention that in the event of your death the surviving spouse can continue to live in the home.

Partner's pension

You can designate each other as beneficiaries of the partner's pension (equivalent to widow/widower's pension).

In this context, most pension funds require a copy of the cohabitation contract and sometimes extracts from each of you from the joint Basic Registration of Persons (marital status).

Under current legislation, married and registered partners are subject to the Pension Equalization in Divorce Act.

This means that upon divorce, the value of retirement pension rights accrued by each of the spouses/registered partners during the years of marriage are divided equally. For unmarried people, there is the possibility to make a similar arrangement in the cohabitation contract. The cohabitation contract may provide that this arrangement applies, for example, if the cohabitation has lasted longer than ten years. However, you can also stipulate that this period does not apply, or agree to waive pension equalization altogether.

Alimony

You could agree that when the cohabitation breaks up, there is a mutual obligation to pay maintenance (spousal support) to the person who does not have sufficient income to support him or herself.

This arrangement could possibly be limited to the case of children born from the relationship.

Mediation

You can stipulate in a cohabitation contract that in case of disputes among yourselves or about the content of the cohabitation contract, you will turn to a mediator instead of using a lawyer.

Mediation is a form of conflict mediation in which the parties resolve the dispute together with the help of a mediator. The mediator is independent and impartial.

Although the utmost care has been taken in preparing these notes, it is possible that certain information may be incomplete or, over time - partly as a result of changes in legislation - may become outdated or no longer (completely) accurate. Periodic consultation with a notary office is therefore advisable. We accept no liability whatsoever for any inaccuracies in these notes.