Cohabitation Agreement: Legal Protection for Unmarried Couples
A cohabitation agreement is a sensible way for unmarried couples to protect their financial interests. It may seem an unromantic notion, but a making a cohabitation agreement (or 'living together agreement') is practical and easy to do.
Making a written agreement doesn't mean that you think the relationship will fail any more they taking out building insurance says you think your house will fall down. It simply recognizes the fact the we just don't know what the future brings.
Why do we need a living together agreement?
Many people still think that if they live together for several years they somehow gain additional legal rights as 'common law' spouses. This is simply not true. The law, as it currently stands, does not give unmarried couples the same rights as married couples (or couples in civil partnerships).
A piece of legislation: the Cohabitation Rights Bill is before the House of Lords. If and when it is passed it will give certain legal rights to cohabiting couples and put some basic protections in place should the couple split up. But until this legislation is passed the situation remains that unmarried couples have very few legal rights compared to married couples and those in civil partnerships. If you and your partner are living together as an unmarried couple then it may not cause you any immediate problems, but should your relationship end or one of you die you could be in for a nasty shock.
A cohabitation agreement helps address some of these potential problems but setting out, in a legal document, how you will manage your financial affairs as a couple and how you wish to divide your assets if you split up or one of you dies.
What happens if we don't have a cohabitation agreement?If you and your partner have not drafted a living together agreement and split up these are some of the situations you could be faced with:
- financial hardship - neither of your are obliged to pay maintenance - even if one of you has given up work to care for children
- evicted from your home - if you are renting your home and your name is not on the lease you may not have an automatic right to stay
- unfair distribution of assets and savings - your finances and assets will not be split 50/50 but according to who paid for what.
If one of you should die without suitable legal arrangements in place the surviving partner could be left with serious financial problems:
- no inheritance - if the person who dies has not made a will naming the partner as benefactor the surviving partner will have no automatic right to inherit, as a spouse or civil partner would
- inheritance tax - even if there is a valid will, the surviving partner will be subject to inheritance tax over the threshold
- state benefits - you won't be entitled to a range of state benefits including a portion of your partner's NICs
- pension payouts - you may not be automatically entitled to survivors benefits of any occupational pension or life assurance schemes in which your partner had invested.
Is a Cohabitation Agreement Legally Binding?
Like a prenuptial agreement, a cohabitation agreement is not a legally binding agreement i.e. the courts are not required by law to divide your assets exactly as you have out in the agreement. Having said that, well-drafted cohabitation agreements can be submitted to the court as evidence supporting a claim and are generally 'persuasive' i.e. the courts will split assets as you have set out in the agreement.
The courts will not accept a cohabiting agreement if there is any indication that either party was in any coerced into signing or was not aware of the implications of the agreement. In order to avoid the agreement being disregarded, both couples should seek independent legal advice before signing. Evidence of taking advice will show that the agreement has been 'properly effected'.
What Should a Cohabitation Agreement Cover?A living together agreement is pretty straightforward. It sets out things such as:
- who owns the family home and in what shares
- what property or assets belong to each partner individually and which are owned jointly
- whether things bought jointly as an unmarried couple are owned in equal shares or in shares depending on how much each contributed to their purchase
- whether or not there are any joint bank accounts
- who is responsible for any debit and credit arrangements entered into
- how you will manage your day-to-day living expenses
- when the agreement ends e.g. if you are separated for more than 6 months
- what you want to happen to your home and assets should your partner die.
Each partner will also have to make a list of all the assets they owned before making the agreement. This forms a schedule which is attached to the agreement and lists those things that each of you will retain ownership of should you split up.
If either of you have significant assets, children from previous relationships or any other matters of legal concern then you should probably talk to a solicitor before signing a living together agreement. A solicitor can offer advice and draft a bespoke cohabitation agreement for you. If however, your financial affairs are straightforward then you might want to use a standard template agreement. A quick online search will provide a range of options, including the Clickdocs cohabitation agreement.
Other legal things to considerIn addition to drawing up a cohabitation agreement, there are several other things you should consider doing to protect your future security if you are living as an unmarried couple. Things to look into:
- if you are renting a home together, make sure you are both named in the lease
- if you have bought or are thinking of buying a home together, get legal advice about whether you should own it as tenants in common or joint tenants
- if you are the father of your partner's child then make sure you have parental responsibility
- make a will
- check out details of your pension and life assurance schemes to see what benefits your partner will be entitled to.