Cohabitation Agreement
Although increasing numbers of people choose to live together without entering into marriage or civil partnership, many are not aware if their rights if the relationship ends and they go their separate ways. Some of the assumptions that people make about cohabitation are simply myths.
Myth 1
“If a couple live together for 2 years, the law considers them to be common law spouses.”
There is no such thing as a common law spouse. However long a couple lives together, as the law stands at present, they do not have the same rights as a couple who have married or entered into a civil partnership.
Myth 2
“If one person dies intestate, the other partner will automatically inherit everything.”
It all depends on the circumstances. The intestacy rules (which apply if there is no Will) will not allow anything to automatically go to one’s partner and it may therefore be necessary to make a claim against the estate by applying to Court. There is no guarantee of success. To be absolutely sure of protecting your partner, a Will is essential.
Myth 3
“If one partner has given up his or her job to stay at home and look after the children they will be entitled to make a financial claim against their partner if they separate.”
A co-habitee has no right to claim
- Money to cover living costs for him or herself (this is known as maintenance in England and Wales)
- A capital lump sum
- A share in his/her partner’s pension
- A person may, in these circumstances be able to claim against his or her partner’s estate on death if they were financially dependent on the deceased co-habitee.
Myth 4
- “If you pay the mortgage you will be entitled to a share of the house that you and your partner have lived in for 10 years, even if the house is not in your name and there are no children”.
Whether this is true or not depends on the circumstances, but it is likely that merely paying the interest on the mortgage will not be enough to gain a share in the house. Only those who are joint owners of a property, or have made one of the few contributions towards the property that a court will recognise, are entitled to a share in that property. Giving up a career and looking after children or paying all the household expenses can count for nothing. The only contributions that a Court will consider, at present, are the following ones: - A direct contribution to the purchase price of the property
- A significant contribution which is likely to increase the value of the house eg. paying for a new conservatory
This must be coupled with written proof that the work was once in reliance on a promise that the house would be owned jointly if a contribution was made. Even making such a contribution may not result in the share of the house that the co-habitee expected.
The situation would be different if there are children.
What can individuals who are co-habiting do to address these issues?
1. Make sure that any property owned is in joint names and that each person sharing the property is clearly identifiable.
If a couple hold a property as “tenants in common” they can decide the exact share that each one has in the property. Many couples with children prefer to be “joint tenants” so that if one of them dies, the other automatically becomes sole owner of the whole property. We can advise you on how best to own your property early on in the transaction. You may also want to consider a Trust Deed.
2. Enter into a co-habitation agreement
This is a form of legal agreement reached between a couple who have chosen to live together (whether heterosexual or homosexual). We can help you set up such an agreement so that you can regulate property rights and other assets owned by you and your partner. It can also cover who pays for what, and how responsibilities in the home are to be shared. Although there is no certainty that the Courts would enforce the agreement, recent case law confirms that in many situations the Courts would take account of such an agreement.
3. Make Wills or update Wills
This will deal with the division of property and, if there are children, can be used to appoint guardians for the children, if appropriate. See our ‘ Making a Will’ page for further information.
It is also worth noting some of the tax implications. The transfer of assets over a certain amount between partners who are not married or civil partnered (especially on death) may be subject to Inheritance Tax at 40%. Similarly, a disposal of assets made between such a couple may be subject to Capital Gains Tax (CGT), whereas it would not be chargeable to CGT if the couple were married, or had entered into a civil partnership.