How couples can protect their finances when cohabiting

How couples can protect their finances when cohabiting
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It’s the fastest-growing type of family unit in the UK but cohabiting couples have few rights at the end of a relationship and are treated as unrelated individuals, regardless of the time they’ve spent together.

Despite rumblings from the Law Commission and the private Cohabitation Rights Bill in 2014/15, family lawyer Jacqueline Major from London law firm Hodge Jones & Allen
says introducing legislation to protect cohabitees remains a political hot potato and is unlikely to succeed.

"This is because for every proponent of change, there is another who says that cohabitation should be unregulated precisely because that is its key distinction from marriage. If they chose to, people should have the freedom to have such relationships without financial consequences," she says.

Common law marriage myth

“It’s right to push for change because too many people fall into the trap of believing the ‘common law marriage myth’ that, somehow, because they’ve been together a long time and have children, they’re protected by the law in the same way as if they were married.”

Jacqueline's advice is to make sure you understand what you are letting yourself in for so that you both make an informed choice and there are no unpleasant surprises lurking in the future.

"People, often women, usually find to their detriment that despite contributing to the success and prosperity of family life for ages, if they part, they have no access to financial support.

“Some may have a claim for financial support on behalf of their children under the Children Act 1989, but these remedies are not always enough. Others may have a claim in respect of property under the complex common law of trusts, but they would need to show an agreement to share the property or a contribution to the value. As a result, many cohabitants and their children can face financial hardship following a relationship breakdown.”

 Consider a cohabitation agreement before moving in together.

Consider a cohabitation agreement before moving in together.

Here's how to protect yourself when you cohabit

  • Do consider entering into a cohabitation agreement before moving in together. This will set the ground rules for the financial and other arrangements in the relationship and may prevent litigious issues if you separate
  • Do make it clear who owns property and in what shares. This can be detailed in a deed of trust and a cohabitation agreement, and a recording on legal title of the property. Update it to reflect any changes
  • Do keep finances separate – it will be easier to see who has what should you separate and will avoid heated disputes
  • Do keep accurate records of your financial contributions to any property held by your partner and vice versa
  • Do write “gift” or “loan” on any payments made to your partner (check, bank transfers or direct debits)
  • Do remember that if you have children you will both be financially responsible for the children regardless of whether you were married or not
  • Do make a will to ensure your partner will inherit from you should you die as cohabitants do not benefit automatically under the intestacy rules
  • Don’t agree to your partner buying a property and placing it in their sole name if you make a direct contribution to the purchase price
  • Don’t make a significant financial contribution to the property, such as paying for an extension, without agreeing whether this increases your interest. Before you contribute or as soon as possible, revise your cohabitation agreement, deed of trust and the legal title
  • Don’t make direct contributions to the mortgage repayments unless you both decide whether this gives you an interest in the property. Again, record this in a cohabitation agreement and/or deed of trust
  • Don’t co-sign or guarantee debts incurred by your partner unless you intend to be equally responsible for repaying them.  If you separate, you will continue to be legally responsible for them.

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