Cohabitation is when two people in a relationship live together without being married.

In the United Kingdom, best estimates predict that there are more than six million cohabiting couples now. This is more than twice the figure from 20 years ago, with about half of that number estimated to have no awareness of their lack of legal protections if they were to break up from one another.

Many such couples believe that by simply living together for a certain period they become “common law husband and wife” and acquire increased legal protection and rights that way.
That is simply untrue.

Cohabiting couples have very little protection on the breakdown of their relationship, but there are steps that you and your partner can take to arrange your financial affairs sensibly and in advance, in case you were ever to part ways.

Draw up a will

If you are cohabiting, it is essential that you have a valid will in place as, despite change to the rules of intestacy (the way in which your estate is handled after your death if you do not have a will), cohabitees do not automatically have rights to their partner’s estate if they die without leaving a will.

The key and answer to this dilemma is to consider drawing up a written document which clearly sets out what you would want to happen once you are no longer around.

At Prism Family Law, we can help you consider the issues and how best to go about having a will prepared to address those concerns.

Consider writing up a Cohabitation Agreement or Declaration of Trust

A Cohabitation or Living Together Agreement can set out who owns what and in what proportion. The agreement is usually in writing and demarcates exactly what assets each partner is bringing to the relationship and how they should be divided in the event of the relationship breaking down.

The agreement lets you document how you will split your property, the contents, any personal belongings, savings and other assets. It can also set out how much someone has contributed to the mortgage deposit and repayments and how that is to be subsequently accounted. The agreement can also cover how you will support your child or children, over and above any legal requirements to maintain them, as well as how you would deal with bank accounts, debts and any joint purchases, e.g. a car.

As advised, cohabiting couples have no automatic legal rights to remain in a property or to take a share of any assets not owned by them should they separate. This is why long-term partners should arrange either a cohabitation agreement to set out the basis of occupation or, in the alternative, consider drafting a Declaration of Trust to expressly set out the basis of occupation and to demonstrate in writing who owns what and what is expected to happen upon any contemplated separation.

In some cases, the property is owned by one partner but not the other, despite that other having helped to pay the mortgage or having made other types of contributions, for example by helping to decorate or pay the other bills associated with the occupation of any property. Unless such indirect contributions are set out in a written agreement, the partner who does not own the property in any way could find they have no right to a share of the home if they were to ever split up.

As well as helping you plan for a time when you are no longer living together, a cohabitation agreement can be used to clarify other areas of potential conflict and can also be used to cover day-to-day matters such as the way in which the household is run.

At Prism Family Law, we can advise you on the appropriate wording required to either protect or to otherwise establish an interest in cohabited property and appropriately advise you on all the other issues that from time to time may arise from the joint occupation of the property.

Use sound legal structures for property contracts

When buying a property in joint names, you ought to have been asked the question as to how, as a couple, you wish for the property to be owned and registered: “do you want the property to be owned as joint tenants or tenants in common?”

If you have never heard of either term, then it is more than likely that the property you jointly occupy and bought has been registered with the HM Land Registry as a joint tenancy – this means that you both own the whole of the property in equal measure so that if one partner dies, the property automatically goes to the other owner.

If this is not what was intended, then you can sever the joint tenancy and instead agree to own the property as tenants in common – by this method you can specify your shares of ownership and so can leave your share to whoever you wish by way of a will – this is often recommended in cases whereby parents have loaned sums to help purchase the property, so as to ring fence that share in the future upon separation and any subsequent sale.

At Prism Family Law, we can help find out how the property has been registered. We can also assist you in severing a joint tenancy and in place have it recorded that the property is to be owned as tenants in common, at specified shares subject to your instructions. This can be then carried out in conjunction with the preparation of a Cohabitation Agreement as outlined above.

Carry out pension planning

Unlike married couples, unmarried couples who reside and live together are not automatically entitled to receive the state pension or bereavement allowance for deceased partners.

Furthermore, there may be complications in some pension schemes paying out to unmarried partners in the event of death, especially when it comes to occupational schemes. Whilst most schemes deal with married couples, they will not necessarily deal with cohabiting partners.

In such cases, it may be appropriate to complete an expression of wish form to inform pension providers where any benefits on death are to go. If cohabiting, it is recommended that you name your partner as the person you choose to benefit.

Think about any tax consequences

Married couples and same-sex couples in a civil partnership enjoy some limited tax advantages over other cohabiting couples.

Married couples are permitted to transfer ownership of assets between themselves with no tax liability. This means that if the sale of any asset such as a property would result in a capital gains tax bill, part or all of an asset could be transferred in order to use both partners’ annual capital gains tax allowance, thus reducing the tax bill.

However, if a couple are not married, any assets passing from, say, the deceased partner to the other partner, would be potentially liable to Inheritance Tax.

How can Prism Family Law help?

Here at Prism Family Law, we are authorised and regulated to provide legal advice and help, but not financial services. We are able to help you consider all the available options and work with trusted experts in the financial services industry, so that you are able to effectively plan and consider all the available costs and consequences of any action considered to address cohabitation issues.

We can help you seek advice and help in the making of a will to record your intentions upon death. We can also assist in the drafting of any cohabitation agreement to regularise the ownership and occupation of a property and can provide help and advice in relation to the best way to owner the property – whether that be as joint tenants or as tenants in common.

At Prism Family Law we offer all new and potential clients free initial appointments so that you can seek out legal advice on the issues that concern you, with no obligation to act on our recommendations. We are able to offer our cohabitation agreements for a fixed fee and this will be tailored to the circumstances of your case.

Should you wish to speak to a specialist in this area, then please do not hesitate to telephone 0191 269 6871 or alternatively email [email protected] for help.