The financial dangers for unmarried couples

Unmarried couples should take stock and seek legal advice before moving in with a partner or purchasing a property together, writes Jackie Meredith, our Head of Family Department.

It is a complete myth that cohabiting couples have the same legal rights as married partners – and this can cause enormous financial heartache if separation occurs.

I recently resolved a cohabitation dispute which had ongoing for 10 years before my involvement.

There is no such thing as a ‘common law marriage’ in the eyes of the law.  It does not matter how long you have been together, or how long you have lived together – unless you marry or enter into a civil partnership, you do not have the same financial claims.

When it comes to the breakdown of a relationship versus the breakdown of a marriage, the legal approach is vastly different.

It is vital that people understand their legal rights and the interests they will have in a property moving forwards before they make any rash decisions.

There has been a 144 per cent increase in the number of cohabiting couples over the last 25 years.

Furthermore, one recent study predicted that marriage is in such rapid decline in the UK that it will soon fizzle out completely, with just one couple in every 400 adults opting to tie the knot by 2062.

Reforms have been proposed by Labour to give millions of cohabiting couples new property rights – but, for now at least, the situation can be murky.

In cohabitation disputes, the first step the Court takes when deciding whether someone has an interest in a property is to look at the documents confirming legal ownership.

In comparison, when it comes to the breakdown of a marriage, the starting point for division of assets of the marriage is typically 50/50, but it is not black and white and the Court has wide ranging powers when determining distribution of matrimonial assets.

There are many situations where disputes can arise after a relationship breakdown, for example where the property is legally registered in only one person’s name. There could be an unequal contribution of funds at the point of purchase which was not recorded in a formal document, or where there are children involved.

Cohabitee disputes can be very expensive and time consuming so it is better, in my opinion, to be proactive about the matter by seeking legal advice before taking the next step in a relationship.

There are also succession and parental responsibility implications. Cohabiting partners are not entitled to the same Inheritance Tax, Capital Gains Tax and Stamp Duty Land, and parents will not have the same rights if they are not named on the birth certificate.

A variety of measures can be put in place to safeguard against future problems, including a cohabitation agreement, wills and trusts.

It might feel like an awkward conversation to have with your partner when things are going well, but I’d really urge people to protect their interests when purchasing a property with their partner.

Jackie is based in ORJ’s Telford office but also offers advice to those in the Stafford, Shrewsbury and neighbouring areas. Get in touch today: Jackie.Meredith@orj.co.uk