As we step into the new year, many of us are making resolutions to improve our health, relationships, and finances. If you’re in an unmarried couple, one of the most important resolutions you can make is to protect your wealth and assets for the future. While New Year’s resolutions often focus on personal goals, this is the perfect time to consider how you can safeguard your financial future together.
Unmarried couples often assume they are automatically protected under the law in the same way as married couples, but this is a misconception. In reality, the law does not automatically grant unmarried partners the same rights to property or finances in the event of separation, death, or dispute. Without the legal protections that marriage offers, it’s essential to take proactive steps to safeguard both your wealth and your relationship. This is where a cohabitation agreement and declarations of trust come in, offering essential protection and peace of mind.
The benefits of a cohabitation agreement
A cohabitation agreement is a written contract between two people living together but not married. It outlines each partner’s rights and responsibilities in relation to their shared life together, including financial matters, property ownership, and what happens in the event of separation.
Here are some key benefits of having a cohabitation agreement:
- Clarity and certainty: One of the most significant advantages of a cohabitation agreement is that it provides clear guidelines on how assets will be divided in case of separation. Without such an agreement, disputes over finances and property can lead to lengthy and costly legal battles.
- Financial protection: A cohabitation agreement can address how finances are managed during the relationship, including shared bills, savings, and investments. It ensures both partners are on the same page and can help avoid misunderstandings or one partner feeling unfairly treated.
- Estate planning and inheritance: Many unmarried couples mistakenly assume that, in the event of one partner’s death, they will automatically inherit assets. However, unless a will is in place, the surviving partner may have no legal claim to the deceased’s estate. A cohabitation agreement can clarify the intentions of both partners regarding estate planning, and it can provide reassurance that your partner will be taken care of, even without a formal marriage.
- Prevent future conflict: Should the relationship come to an end, a cohabitation agreement can help prevent emotional and financial strain. Having an agreement in place provides a clear and fair framework for dividing property, reducing the chances of lengthy disputes.
The benefits of declarations of trust
A declaration of trust is another essential document, particularly when you and your partner share property, particularly if you have made unequal contributions towards the purchase of the property, or towards improvement and renovation works. It outlines the financial contributions of each person towards the purchase or upkeep of the property, ensuring that both partners’ interests are protected.
Here are the key benefits of having a declaration of trust:
- Clarifying ownership: If you and your partner buy property together, a declaration of trust can specify how much each of you owns and what percentage of the property each partner holds. This is especially important if one person is contributing more to the purchase price or if the property is in joint names but there is an unequal financial contribution.
- Protecting financial contributions: In the absence of a declaration of trust, one partner may not be able to claim ownership of the property, even if they have contributed significantly to its purchase or mortgage. This could lead to disputes if the relationship ends. The declaration of trust ensures that each person’s financial input is acknowledged and protected.
- Providing legal security: A declaration of trust also provides legal security regarding what happens if the property is sold or if one partner wants to sell their share. Without a declaration of trust, the division of proceeds from the sale of the property could become a point of contention, potentially resulting in lengthy legal disputes.
- Peace of mind for both partners: Having a declaration of trust in place gives both parties peace of mind, knowing that their interests in the property are clearly defined. It removes uncertainty, ensuring that both partners understand their rights and obligations.
Why now is the perfect time to act
The new year is a natural time for reflection and forward planning. While you may be focusing on personal resolutions such as health and career goals, this is also an excellent time to ensure that your financial and legal interests are secure. Cohabitation agreements and declarations of trust may not be the most romantic or exciting resolution to make, but they are incredibly important for the security of both you and your partner.
By putting these legal protections in place, you are taking control of your future and safeguarding your wealth. Not only does this help protect your financial interests, but it also fosters trust and open communication between you and your partner.
If you and your partner are not yet in a cohabitation agreement or have not made a declaration of trust for your shared property, consider making it a priority in 2024. Taking action now can prevent costly legal issues down the road and provide peace of mind for the future.
Here’s to a year of growth, security, and peace of mind, both personally and financially!