The Marriage Foundation recently conducted research that indicates almost 52% of teens and 20-year-olds in the UK do not intend to marry. 2011 census figures identify more than 6.5 million people currently living in cohabiting relationships, and with only a quarter of couples who move in together seeing it as an active step towards marriage, cohabitation is becoming the status quo – even for partners planning a family.
Factor into this cultural shift, that the average cost of a wedding in the UK soaring to a mind-boggling £18,000, it is perhaps no surprise that cohabitation is on the rise.
Unfortunately this shift away from the traditional nuclear family unit is not echoed in law.
While the legal rights enjoyed by married couples and civil partnerships are defined by statute, for cohabiting partners without any formal cohabitation agreement in place, they are pretty much non-existent.
The upshot is that cohabiting individuals end up with no rights or recourse in law, if their relationship fails or – worse – one partner were to die; often turning the division of assets and/or inheritance into costly legal battles.
Busting the Common Law myth
Common Law is nothing more than a common myth, with a worrying 58% of UK citizens unaware that it is not a recognized legal status. In divorce, or in dissolution of a civil partnership, there are laws to protect the interests of both parties, to ensure assets are divided fairly and to reconcile the living expenses of the non-breadwinner. Some break ups are inevitably more straightforward than others, but at least a legally-defined process is in place.
Equally, if a spouse or civil partner dies intestate (without leaving a will) their estate would automatically pass to the surviving partner and, depending on its value, their children. In this instance, inheritance tax is not incurred.
However, cohabiting couples face problems.
With no legal provision for automatic inheritance, if one partner dies without a will, assets are left open to claims by relatives. In fact, you may find yourself in court having to prove ownership of property, despite having paid towards it.
Even if the surviving partner is named in a will, any inheritance of assets over the personal threshold of £325,000 will be subject to 40% inheritance tax. Inherited properties can easily be valued at much higher rates, meaning you may have to sell the home in order to pay the tax bill.
Cohabitation Agreements in short
Cohabitation agreements (also known as ‘no-nups’) have soared in recent years, not always at the behest of cohabiting couples themselves. More and more parents are pushing for a legal fall-back should their child’s relationship fail. This is being driven by a huge surge in house prices, with many young adults becoming increasingly reliant on the bank of mum and dad to raise enough for a deposit.
So what exactly is a cohabitation agreement? Straightforward and inexpensive to put together, it’s a contract between two people that live together, detailing the division of combined assets if the relationship fails, or one partner dies.
If you’re a cohabiting couple considering making one yourselves, it’s important to see it as a positive relationship step that gives both parties security, rather than seeing it as a lack of faith in the longevity of your relationship.
To have legal force, it should state that it is intended to be legally binding, and cover the following:
- What rights each partner has to the home
- Ownership of other assets (insurance policies, bank accounts and valuables).
- How any outstanding debts will be divided.
- The division of expenses whilst living together.
- How each partner will support their dependants in terms of maintenance.
The agreement should also state how long it is intended to last, and must be signed with a witness present.
If you see the value in cohabitation agreements, you should also discuss the benefits of making a will.
Change in the air?
Social trends are shifting, but don’t expect the law to catch up any time soon. As far back as 2007, the Law Commission published a report examining the financial consequences of break-ups for cohabiting couples, and recommended a series of legal changes to level the field for cohabitees, bringing their rights closer to those of married couples.
A year later, the Government rejected the ideas, and in 2011 drew a line under the matter saying there were no plans to consider the proposals in the current parliament.
About the Author: Muna Saleem is an associate solicitor with Crisp & Co, a Family Law firm with offices across South East England. She is an accredited member of the Law Society’s Family Law Panel, practicing in all areas of private family law from divorce and financial remedy applications to cohabitee disputes and children matters such as Child Arrangement Orders and international relocation applications. You can connect with her or any of Crisp & Co’s Solicitor’s via Facebook or call them on 020 3468 6721.
Muna Saleem
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