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Co-habiting is no guarantee of financial provision
6 out of 10 people*, still believe that if they live with their partner for a certain period of time (sometimes believed to be about 2 years) that they are entitled to a share of the ‘family' assets (usually a property) which are owned solely by the other partner however, as Helen Oakes advises, this couldn't be further from the truth...
In 1984, the case of Burns and Burns demonstrated that sharing a house, a name and having children together is no guarantee of financial provision for the more vulnerable partner. This remains unchanged today and most cohabitants will be blissfully unaware that their situation would be regulated by Property Law rather than Family Law.
Cohabiting relationships are fragile. Research has shown that they are always more likely to break up than marriages entered into at the same time, regardless of age or income. On average, cohabitations last less than two years before breaking up or converting to marriage. Less than four per cent of cohabitations last for ten years or more*.
There has been much recent publicity about the changes in the law for gay cohabiting couples and the acquisition of legal rights akin to that of married couples. Now, however, some heterosexual couples are arguing that they seem to have been left behind by the Politicians.
The confusion and complexity that currently exists has led both the Law Society and Resolution to argue for reform to the law in order to acknowledge the way in which people (gay or straight) are currently managing their lives.
The Law Commission has been asked by the DCA to consider the Law in relation to cohabiting couples on the termination of their relationship by separation or death. The main aim is to reduce financial hardship suffered by cohabitants or children.
Until the law is changed, those couples who do choose to live together and not marry, can only later rely upon complicated trust law to argue that they should be entitled to a share of the assets. So, sexuality aside, it is therefore essential that some measures are taken to protect future fall-out when embarking on cohabitation.
- 1. Enter into a cohabitation agreement to record how you want to divide assets in the event of a separation. You can formalise aspects of your status with a partner by drawing up a cohabitation contract which outlines the rights and obligations of each partner towards each other. Cohabitation Agreements can be useful to remind a couple of their original intentions despite the fact that they are not strictly speaking enforceable. In practice, instead of a cohabitation contract, it is possible to make a series of legally enforceable agreements on specific matters, for example, how a jointly owned house is shared. Cohabitation Agreements are discussed in more detail below.
- 2. Make sure that the house or tenancy is in joint names in appropriate shares. Legal Advice should be taken when purchasing a property or investing money into a property owned by your partner.
- 3. Make a will because, on death, a cohabitee will not be entitled to receive anything under the rules of intestacy with the partner's assets reverting to the closest relative.
- 4. Make provisions for the children of the family. Unmarried fathers do not automatically have Parental Responsibility unless they register the child's birth with the mother although it can be acquired at a later date either by agreement or an order of the Court.
- 5. Think about, and discuss, whether or not bank accounts/credit cards or other debts should be joint or individually taken out. If separate bank accounts are held then if one party should die the other will have no automatic access to the account and the money will eventually be dispersed according to the rules of intestacy or under the provisions of any will.
- 6. Take independent financial advice from an accountant regarding tax liability.
- 7. Pensions. Providers of Pensions are becoming more flexible and it is now possible to nominate your cohabitee to be the recipient of any death benefits that are available.
In short, you should be proactive and define your own partnership through a legal contract.
The need for Cohabitation Agreements. A cohabitation agreement is a private contract between cohabitants, which typically tries to establish contractually for the parties the rights and obligations that married people obtain by custom, statute, and agreement.
Cohabitation agreements are not legally binding documents, but they can help to set down some practical guidelines for the relationship between you and your partner.
You can include a wide range of matters in the agreement, which cover the things that are important to you and your partner. They can cover financial matters, how property is held and how disputes may be settled. The advantage of drawing up an agreement like this is that it makes both of you consider, before there is any dispute, your expectations of the relationship and how you would handle the situation if the relationship breaks down.
Although courts are showing more willingness to take account of such agreements there is still no certainty that they would enforce one.
It is also important (just as with a will) to keep your situation under review, and to vary the agreement from time to time as your circumstances change.
The contents of a cohabitation agreement
Everyone's personal situation is different, which means that each agreement will be different. Some of the things you should consider including in a cohabitation agreement are:
1. The purpose of your agreement: do you intend the agreement to be legally binding or merely a statement of your expectations?
2. The length of time the agreement will cover.
3. Arrangements for children - for example, arrangements for maintenance if you should separate, agreement on having contact.
4. How you will treat property owned by either of you at the beginning of the relationship.
5. Will property acquired during cohabitation be shared equally or in proportions set out in the agreement?
6. How will you deal with debts you have at the beginning of the relationship? Consider making a statement of what each currently owes.
7. Inheritance and wills - what, if anything, will you leave to each other, (although it is still important that you both make a will).
8. How you will resolve disagreements- for example, via professional conciliation or a named mutually agreed conciliator.
If you find that you are not able to sort matters out amicably, and you find you are in dispute over how to work things out, you will need to use the cohabitation agreement in a legal setting. It is a type of "contract" and it is therefore important that it meets certain legal criteria that apply to all contracts.
How to make a cohabitation agreement
Your agreement is more likely to be treated seriously by a court if you follow these guidelines. The document should be:
1. Written down as this shows that you intend to be legally bound and the agreement can simply state you have such an intention.
2. Clear and unambiguous. The intentions of you both must be as detailed as possible, for example if part of the agreement relates to one of you making financial provision for the other, you need to set out where the money will come from and how and when it will be paid.
3. In the form of a deed. This means that it is a legal document. The agreement needs to record that it is being signed as a deed in the presence of independent witnesses to your signatures; be in writing and dated.
4. Entered into after taking independent legal advice as this will strengthen the agreement particularly if the terms of the agreement seem to favour one party over the other. This can also demonstrate that coercion played no part in the negotiations.
5. Clear as to the fact that each party has full knowledge of the other's financial circumstances.
