Agreement to Share Ownership of a Car or Other Joint Purchase

Many people make purchases item by item, understanding that whoever makes the purchase owns the property. You could buy the kitchen table and chairs, and your girlfriend buy the lamp and stereo. If you split up, each keeps the property he or she bought. In this situation, you would use the Agreement to Keep Property Separate form included here.

Purchases also can be pooled. You can jointly own everything bought during the relationship, and divide it all 50-50 if you separate. In this case, the Agreement to Share Property, also included here, would be appropriate.

While these types of consistent approaches to property ownership may simplify things, they are required by neither law nor logic. You could choose a combination of the two methods. Some items may be separately owned, some pooled 50-50, and some shared in proportion to how much money each of you contributed toward the purchase price or how much labor each put into upkeep.

How to Prepare an Agreement for a Joint Purchase

Many unmarried couples opt for a basic keeping-things-separate approach, at least when they first get together. However, an unmarried couple will often want to own one, or sometimes several, major items together, as would be the case if you pool income to buy a car and an expensive sound system. Clause 6 in the sample Agreement to Keep Property Separate form allows you to easily do this.

You can prepare an Agreement for a Joint Purchase using the form included here. Simply fill in the details of your joint purchase, including the item or property bought, the percentage of ownership (such as 50-50 or 60-40) each of you has, and how you will deal with the property should you split up. For example, you may specify that one person automatically has the right (of first refusal) to buy out the other's share. You may agree to do a simple coin toss or come up with your own approach depending upon the particular property.

Buying a Car Together

It's not uncommon for unmarried couples to purchase a car together. If you do so, be aware that buying a car means entering into a series of agreements with third parties (for example, a car dealer, a bank, and an insurance company) that are binding regardless of the status of your relationship.

It's important to understand your state vehicle ownership rules before you come up with an agreement to jointly purchase a car (or if you want to change ownership or title in a car you already own). State rules often vary, so don't just rely on the general vehicle ownership rules described below, Check with your state's motor vehicle department regarding the words that should be used to establish the different types of joint ownership of motor vehicles. These may be slightly different from those outlined here.

Here are some of the common legal ways you can jointly share ownership of a car. You will want to choose the one that is most financially viable for your situatins.

Sole Ownership. If you intend that the vehicle will belong to only one partner, but the other partner will advance part or all of the down payment in the form of a loan, the borrower should sign a written contract to repay. This contract is a called a promissory note. If you choose this option, you should register the vehicle in the borrower's name only.

If you decide that only one of you will own the car, you can include the other partner as an "additional driver" on the car insurance. One advantage to sole car ownership: If the car is involved in an accident, only the partner who owns the car can be sued. (But if the other partner was driving, that person could be sued for negligent actions.)

Joint Ownership. If you intend to own the vehicle jointly, you'll need a written agreement outlining the details. This is especially important if only one of you signed for the loan but both of you will be contributing toward its repayment. When you register the vehicle with the state, put it in both names. Depending on state law, you often have three options with car registration:

Option 1. "Thomas Finnegan or Keija Adams." This creates a joint tenancy in many states; if one person dies, the other automatically inherits the car without going through probate. However, depending on state law (see Option 3, below), the "or" form of ownership lets either party sell the vehicle without the knowledge or consent of the other.

Option 2. "Thomas Finnegan and Keija Adams." This establishes a tenancy in common; both signatures are required to transfer title of the vehicle. At death, however, each person can leave his or her share to anyone he or she wishes. If no estate plan is made, the nearest blood relative inherits the deceased person's share by intestate succession. If you want your partner to inherit your interest in the car, include it in your will or consider Option 3, below.

Option 3. "Thomas Finnegan and Keija Adams, as Joint Tenants With Right of Survivorship." Not only does this let the survivor automatically inherit the car without going through probate if one of you dies, but it also requires both signatures to transfer title while you're both alive.

How to Edit and Sign Your Agreement for a Joint Purchase

See our tips for writing a living together agreement before preparing your own agreement. You can edit this Agreement for a Joint Purchase as you see fit, or use it as a starting point to prepare your own agreement. For example, if one of you purchased the jointly owned item by credit card, you may want to add details to Clause 2, clarifying that one person made the purchase, but that the item is jointly owned. See the Sample Joint Purchase Agreement When One Partner Is the Legal Borrower, for ideas.

Make two copies of the final draft (including any attachments) so you and your partner each have a copy.

Sign and date both copies of your agreement. It makes no difference who keeps which—both are "originals."

Keep your copy in a safe place, along with other important documents, such as insurance papers, title slips to jointly held property, leases, copies of wills, important financial papers, and the like.

Keep in mind that only the partner whose name is on the credit card used to purchase an item is legally obligated to pay, even if you have an agreement splitting the cost. If only one of you signs a credit agreement to purchase an item, only that person is legally obligated to pay the creditor. This is true even if you and your partner sign an agreement to share ownership and payments. The creditor will accept money from anyone and properly credit the account, but if a payment isn't made, the creditor will pursue only the person whose name is on the account.

More Advice on Sharing Ownership of a Car or Other Major Purchase

The Sharing Solution, by Janelle Orsi and Emily Doskow is a practical and legal guide on how to create and maintain successful sharing arrangements--from purchasing a car or house together to forming a buying club to purchase household goods.