It is common for many couples to live together long-term without getting married, irrespective of whether or not they are planning to do so in the future. Couples living with each other sometimes wrongly believe that they can exercise the same legal rights as spouses or civil partners when it comes to ownership of financial assets in situations of the death of one of them, or the break up of the relationship.
Regardless of the length of time of your relationship, there is little to no legal privilege in regard to your finances. In absence of the default protection that marriage gives (or common-law marriage in countries where that has some legal recognition), you will have to do something extra.
In order to protect yourself and your interests, and also those of your partner, you need to be aware of your rights and strengthen them where possible.
Financial Protection For Couples Who Cohabitate
With respect to financial protection for unmarried couples, there are certain voluntary arrangements that can ensure rights equivalent to married couples. Making a will is one of them.
Despite recent rumors that UK intestacy laws, which set out how property is inherited on the death of a partner who has not made a will, would undergo changes, mainly as a result of the Law Commission’s recommendations that change is needed, cohabitating, unmarried couples have not been given automatic rights to inherit a partner’s property after their death.
The legal position may change in the future, but for now it is safest to make a will.
So, to protect your interests in the case of partner’s death or break-up – couples living together should assess all parts of their life together. This includes childcare arrangements, property ownership, and financial provisions. A declaration of trust arrangement and a cohabitation agreement can help.
They are legally binding and can help in determining the ownership of assets.
- The declaration of trust, or deed of trust, sets out clearly all assets that each partner owns at the start of a relationship. It also entails what would happen to these assets if the couple splits up. You can treat it like a contract in which payment of bills and extra value, such as home improvement payments, can be settled or divided. It is basically linked to particular properties.
- A cohabitation agreement is a “living together agreement” that covers daily matters like the household expenses and other relationship-specific circumstances. It can include details like childcare finances, school fees of kids, joint accounts, and paying debts. Such agreements cannot be altered without the approval of both.
- Each partner is entitled to equal property rights in the case of a legal marriage, irrespective of who owns, maintains, or pays mortgage for it. But, for live-in couples, things are not that easy. All contributions, such as a mortgage or cash investments, should be included in the declaration of trust.
- Also, couples buying a house together need to ensure that an appropriate legal structure is used so that ownership of the property automatically passes on to the partner after the death of the other. This is known as “joint tenancy”. Under this, both partners are property owners, such that if one dies, the survivor becomes the sole owner.
- Under the new auto-enrollment scheme, all employees of an organization pay into the same workplace pension. Be aware that cohabitating couples cannot automatically claim any pension money due to their partner if their partner dies after or before retirement.
- Investments and savings also need to be included in the cohabitation agreement. Otherwise, you will have no legal right to the wealth after splitting up or the death of a partner. You can agree between you that if investments and savings are jointly owned, both contributors get back the same proportions, as whatever they contributed after the relationship ends.
- Consider this warning as well. If the couple is using a bank account for joint finances – a joint account – then this account needs to be listed in the cohabitation agreement. For jointly owned bank accounts, both partners have equal rights to the money in that account. Also consider what happens in the case of death. If the account is really just owned by one person and the other accesses it, a surviving partner will have no right to the money.
- Child maintenance can also be claimed from an ex-partner. More extensive financial provisions can be added in the cohabitation agreement, but be aware that child arrangements are ultimately decided by a judge. Even children who are not related biologically to either or one of the partners, but who are family members, will be entitled to be maintained.
Living together and investing in property with your partner is an incredible experience, but be smart and protect yourself and your interests during a relationship.
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