The New Year may bring with it exciting new plans, maybe you’ve decided to move in with your partner. From a legal perspective the myth of the ‘common law spouse’ is still prevalent. Many people mistakenly believe that simply living together can give you the same rights as marriage. Others believe that by having a child together they automatically acquire legal rights, whether married or not. They are mistaken.
Only couples who get married, or register a civil partnership, will automatically acquire legal rights and responsibilities in relation to each other. There are key differences in terms of financial matters between those who are married and those who cohabit. Aside from certain tax advantages for married couples as opposed to cohabitees in respect of Capital Gains Tax and Inheritance Tax, anyone planning to move in with their partner should consider their position in relation to the property they will be living in whether it is rented, owned by one party or jointly owned.
In Scotland there are laws regulating what happens to a property when a cohabiting couple separate. However, in England & Wales, rights to the property will depend upon how you own it. If it is a joint purchase the property will be deemed to be jointly owned; if you are the sole owner, the Court will say it belongs to one or other of the parties. If one party has contributed to the mortgage the burden of proof is upon them to prove it. It is a sensible idea to have a declaration of trust drawn up to show how the property is held. Unfortunately, unravelling the financial consequences of the breakdown of an unmarried relationship is often more complicated than sorting out the financial issues between spouses on divorce. One way of avoiding this drama is to enter into a written agreement known as a Living Together Agreement. Whilst it may not be romantic to consider the breakdown of a relationship in its early and enjoyable stages, it may avoid a lot of stress in the future should the worst happen.
This written record can show the couple’s intentions at the time they began living together, which will often be more accurate than recollections some 10 years or more later. It makes it absolutely clear who owns what and can also cover who is responsible for what in terms of the household outgoings and what should happen if one party wants to sell before the other.
A Living Together Agreement can also cover the effect of any improvements or major repairs on the family home. If you have children together it is a sensible forum to record how the children are to be supported and cared for should the relationship break down.
Once two people start living together, it is not unusual for them to begin making joint purchases on items for the home. It is sensible to record what should happen to such joint assets should the parties separate in the future.
A Living Together Agreement can provide a practical framework to assist both parties to a relationship should things not work out. The reality is that given that over 4 million people in the UK now live together the law has not caught up. The cohabitation reform in Scotland will surely at some point be implemented in England and Wales. However, in the meantime, the cost of drawing up a Living Together Agreement is a fraction of the cost of litigating the matter in years to come.
These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.