Cohabiting couples are the fastest growing family type according to official figures. . Apparently the number of cohabiting couples has more than doubled between 1996 and 2016 (from 1.5 million to 3.3 million), representing 1 in 5 families who share this dynamic and numbers are anticipated only to grow.
Marriages declined by 3.3% in 2018 (234,795) compared to 2017. Marriage rates for opposite-sex couples were the lowest on record with 18.6 marriages per 1,000 unmarried women, and 20.1 marriages per 1,000 unmarried men (source: Office for National Statistics).
Unfortunately, many people still believe that by living with a partner, in a manner akin to 'husband and wife', or having children with them, they are automatically entitled to a share of the other's wealth or to claim income from them when the relationship breaks down.
Yet cohabitants' rights when splitting differ to those following the breakdown of a civil partnership or marriage where it's the court's intention to divide the family assets regardless of who owns them, to try fairly to meet each parties' needs and those of any children. Often this can involve the total assets being divided equally.
By contrast, if two individuals are cohabiting and split their entitlement is only to:
- Any assets held in their respective sole names;
- Their share of any assets held in joint names, which may need determination by the court if not specified; and
- If they have children, a more limited claim for financial support for the children either via the Child Maintenance Service or under Schedule I of the Children Act 1989. This is based on the needs of the child, rather than fairness.
Cohabitants do not have an automatic entitlement to a share of any assets owned in the sole name of the other (which could include the home in which they live), nor to maintenance. So when these modern relationships break down, the financially weaker person could be left without financial support or the funds even to rent, let alone purchase a new home.
There are exceptions and it is possible that one person may have acquired an interest in the property of their partner which could lead to a financial claim being made.
Cohabitants also do not have automatic rights against their partner's estate on death as spouses do. Therefore, if their partner dies and has not left a provision for them in a will it may be harder to make a claim against their estate.
Specialist advice upon separation will ensure you are aware of the extent of your entitlement.
What can a cohabitant do to protect their financial interests?
- Ensure that property and assets are purchased in joint names. A declaration of trust when purchasing property helps set out each person's interest in it. There is a distinction between joint tenants and tenants in common and you should understand what these mean in the event of the other's death. You may also need specialist tax advice regarding inheritance.
- Enter into a "living together" or cohabitation agreement. If signed as a deed this will be binding upon both parties. These documents can be drafted flexibly to suit the family's circumstances. For example, it can set out what provision each person will make to the other or for the benefit of any children upon the breakdown of the relationship, the intention being that such provision will be more generous than the law otherwise allows to cohabitating couples.
- Create wills making financial provision for the other in the event of death. We can help with that with our affordable wills service.
- Seek independent financial advice from an IFA or other wealth management professional regarding provision for each other (for example, to establish pensions' beneficiaries)..
The Cohabitation Rights Bill is currently making slow progress through Parliament. It would strengthen cohabitants' financial claims against their partners following their relationship breakdown . However, there is public policy tension in that support for such a Bill could be perceived as diminishing the perception of marriage. This may be why Parliament is dragging its feet on the matter.
Until cohabitant rights are enshrined in law it is essential that cohabitants take specialist advice as early as possible to ensure they are protected properly in the event that their relationship comes to an end.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.