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Living together: what you need to know about cohabitation
Moving in together has become so common in Britain that it’s now become the norm for a lot of people. Unfortunately however things can go wrong, with less than 4% of cohabiting relationships lasting more than a decade according to think-tank Civitas.
So, while you might not need a piece of paper to prove how much you love each other, it’s essential to have financial security whatever your relationship situation. Find out what your rights are as a cohabiting couple.
Most people still believe that if you live together for long enough you get the same rights as getting married or having a civil partnership. They’re wrong. There’s no such thing as a common law marriage in the eyes of the law and there are no rights attached which poses big risks when you’re pooling your wealth and setting up house together.
No matter how long you’ve been living together, if one of you dies, the other will not automatically inherit their assets. It might seem unfair, but cohabiting partners are not automatically entitled to a share of finances after a split, or to their partner’s pension after he or she dies. If you split up, men will not have an automatic right to see their children, and women will not be entitled to any kind of financial support. Cohabitors don’t count as legal ‘next of kin’.
For all these reasons, you need to get a cohabitation agreement.
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If you have children together, you should be informed of your rights and obligations in case you do split up.
Unmarried dads are required to pay maintenance for their children, however they do not have the same custodial rights as married or divorced fathers would. Guardianship of the child immediately goes to the mother. The father has no right to act on the child’s behalf unless in an emergency.
To ensure your rights as a father, you need to get Parental Responsibility. As of December 2003, an unmarried father who jointly signs the birth register with the mother will have Parental Responsibility automatically (this does not apply to children born before this date though).
If you are not on the birth register, you can get a legally binding Parental Responsibility Agreement (with the mother’s consent) or go through the courts to get a Parental Responsibility Order (if your partner won’t play fair).
Unmarried mothers have no right to their partner’s house or property if they break up – no matter how long they have been together. However, the children do have rights and as such, the mother can remain in the family home until the last child turns 18.
It is for this reason it’s a good idea to have some sort of cohabitation agreement between you, and to think carefully about the way you rent or buy property together – if a house is in both your names, you will have more rights. Ideally, you should have both names on the property deeds as Tenants-in-Common or Joint Tenants.
A cohabitation agreement is like a pre-nuptial agreement, but without the buffet, bouffant hair and bad DJ. You might not need the wedding certificate, but you do need a basic contract covering assets, children and property to save a lot of pain if you break up. This is seen by courts as a binding contract between unrelated parties.
You need to consider:
- The purpose of your agreement – do you intend the agreement to be legally binding or just a statement of your expectations?
- The length of time the agreement will cover
- Arrangements for children - for example, arrangements for maintenance and agreement on having contact should you separate.
- How will you treat property owned by either of you at the beginning of the relationship? - Will property bought while you live together be shared equally or in proportions set out in the agreement?
- How will you deal with debts you have at the beginning of the relationship? - Make a statement of what each of you owes.
- Inheritance and wills – What, if anything, will you leave to each other?
- Who will get what if you break up.
- How you will resolve disagreements – for example, with advice from professionals or through a mutually agreed person.
Cohabitation agreements can be really useful if one of you is much wealthier than the other.
See the Living Together sections on the Advicenow website for more information and a sample cohabitation agreement.
It may be romantic, but moving in together can quickly lose its gloss if each party has different ideas about responsibility. Plus, if your tenancy is just in your partner’s name, you will have no right to stay if your ex asks you to leave or walks out.
- Whose name will be on the tenancy agreement?
- How much rent will each person contribute? This is best paid into a joint account before being paid automatically to the landlord.
- Do you have too much stuff for one flat or home? Which stuff will be sold and how will the profits be used?
- How will bills be split? Consider adding a lump sum each month to your rent account for irregular, annual or biannual bills. Better to contribute more than you expect to pay originally so there’s no shortfall for the rent.
- If you move into your partner’s rented flat you won’t have any right to stay there if you break up – even if you have contributed to the rent. If you would like to safeguard your position there (perhaps to give yourself time to find somewhere else if it all goes pear-shaped) get yourself on the rental agreement as a joint tenant – if the landlord agrees.
Buying a house together is one of the biggest decisions couples will make and therefore should not be taken lightly. There is huge room for error, which can ultimately put your roof and savings at risk.
You need to ensure that you agree in advance what you can each afford to pay. This may be a certain percentage of each partner’s income.
You should also make a note of ‘must-haves’ for each person. You might be willing to compromise on a garage, but your partner may be adamant. Try to rein in shared enthusiasm for “that perfect period palace” in Chelmsford and stick to your budget. But don’t forget to discuss whether the property works for a growing family/having friends to stay/sharing with an elderly relative, if any of those scenarios are likely.
Don’t make a decision on the spot. It’s important to have a good look around one or two areas you’re interested in to get a sense of what is value for money. Compare a handful of properties and talk the decision over with family and friends – preferably as quickly as possible.
It is key that both parties have independent legal advice. This could include, for example, whether a cohabitation agreement is a good idea in your case.
When it comes down to the finances, be sure that the payments are manageable and come before all other spending. The easiest way to do this is set up an automatic payment straight after your pay is deposited to whip the money out of your account before you have a chance to get your hands on it.
Right now, there are great rates to be had so get a competitive deal. Learn more about re-mortgaging here.
Be warned – If your ex owns the home, and there’s no other agreement or understanding in place, you will have no automatic right to stay if they ask you to leave.
If you’re planning to stay shacked up for some time, it’s a good idea to make sure your pension and life insurance plans provide good cover for your partner.
Couples who live together, unlike married couples, are not entitled to receive the state pension or bereavement allowance for deceased partners. Also, some occupational and personal pensions will pay out to partners but many won’t. You should check with your provider to find out what they will do.
Personal pensions can be arranged to cover whoever the pension-holder wants although if you want special provisions you often have to pay a lot more. So, if you’re worried about your partner not having enough money to cope if you shuffle off this mortal coil first, take out a life insurance policy to provide for them.
Thousands of couples are completely unaware that a large number of personal pension plans signed before July 1988 include a clause which will see your partner or spouse get only the contributions you made, rather than the whole pot. Signing away the right was over-looked at the time, because the alternative was a higher overall pension.
Take time to go through yours with a fine-tooth comb. If your pension has the clause, act quickly to switch to a modern plan or take out life insurance to cover the shortfall.
Owning your own home
Owning a home represents the good life for many British couples.
- It is often impossible for single people to get on the property ladder now. You need at least two incomes to even consider it.
- Monthly mortgage payments are invested in your property rather than your landlord’s, building your nest egg instead of theirs.
- The value of your home is likely to grow each year (although nothing is certain).
- You can brag to friends, and invite as many to stay as you like, for as long as you want.
- Most people have no idea what they’re going to be doing for the next 20 years, so committing to paying £1000s each month is risky.
- If it does all go horribly wrong, you risk years of savings and mortgage payments in a messy split.
If you buy a house or flat, or move into your partner’s place and start contributing to the mortgage or the bills – or for that matter re-decorating or buying furniture; you need to protect your interests.
- Agree in advance what you can each afford to pay. This may be a certain percentage of each partner’s income.
- Split the mortgage/bills and unexpected costs. The easiest way to do this is set up an automatic payment to a joint account straight after your pay is deposited to whip the money away before you have a chance to get your hands on it.
- Both get independent legal advice.
- Each take out income protection insurance if you think you really need it.
- Live within your means. Mortgage payments should be manageable and come before all other spending.
- Make sure your mortgage remains competitive. You wouldn’t wear the same flares you wore 20 years ago, so why be stuck in the same daggy mortgage? Learn more about re-mortgaging here.
If you decide to co-own your home then you need to think about how you want to divide it up in legal terms. There are two ways of doing it: either jointly or on the basis of ‘tenants in common’.
- If one of you dies, the surviving partner automatically owns the house, regardless of whether a will has been drawn up.
- This means you can’t ‘gift’ your share of the property to anyone else. Because lots of people don’t bother to make wills, this at least covers the problem of dying intestate (without a will) since there will be no arguments about who subsequently owns the whole house.
- If you split up, though, it’s worth bearing in mind that you might end up feeling short-changed if you have put more money into the house than your partner.
- You might have each paid half of the deposit and then split everything from the mortgage payments down to the decorating bills right down the middle.
- Or, you might have paid most of the deposit and then forked out far more towards the mortgage payments that your partner did.
It doesn’t matter either way – in the eyes of the law you still share the home equally. You could contest this in court, but that would be time-consuming, costly, and might not end up the way you wanted anyway.
You can only sell the house if both of you agree – this may cause problems if one of you wants to sell and the other doesn’t but can’t afford to buy out the remaining share.
Tenants in common
- The difference between this and joint ownership is that there’s a technical division of the property, so each owner can leave their share of the house to anyone they like. This can work well in certain circumstances: it gives each partner an element of control, but it can be tricky if one dies and leaves their share to someone else.
- It’s a good idea for friends or siblings who share ownership of a property. If you and your brother inherit your parents’ house together, the chances are you would rather leave your half share to your spouse or your children rather than passing it on to him.
- Unless you’ve got such a valuable house that planning for Inheritance Tax through the generations is a necessity, it doesn’t really seem fair to inadvertently shackle, or be shackled by, someone you have loved.
If things go wrong
If you’re married and you get divorced, both parties have a right to a share of the former marital home. But, if you have just been co-habiting, there’s no automatic right.
- If the home is in both of your names. Or,
- If you can prove you directly helped buy the home or improve it in some way. For example, if you paid the deposit or mortgage instalments, this would constitute a beneficial interest.
- Life insurance comparisons