More couples are choosing to live together in an unmarried relationship rather than marry or re-marry.
According to the Office for National Statistics, cohabiting couples – both with and without children – were the fastest growing family type over the last 20 years, with numbers more than doubling from 1.5 million in 1996 to 3.3 million in 2016.
But couples often enter into an unmarried relationship without fully considering the financial impact of this seemingly simple and sensible way forward.
Many people believe in the concept of common law marriage, assuming that if they live together as husband and wife they acquire the same rights as a married couple. This, however, is not true.
If you are going through a divorce or have recently divorced, it makes sense to ensure you understand the implications of entering into an unmarried relationship. Like most people, you will probably want to ensure you preserve any assets or funds received from the divorce for you and your children.
Keeping in mind some simple steps can help to protect both you and your new partner. These include:
1. A cohabitation agreement – This sets out how you will manage your property and finances as a couple and what should happen to your property and finances in the event that your relationship breaks down or one of you dies. This can save a significant amount of stress and cost that a dispute over these issues could involve. It allows both of you to enter into the relationship knowing exactly where you stand.
2. Property ownership – It is vital to consider your ownership of any property following your divorce. Even if the property is in your sole name, an unmarried partner can still make claims seeking an interest in it. If the property is to be held in your joint names, you should think carefully about whether equal or unequal ownership would be more appropriate. This can enable you to protect any property you have received from the divorce, or any new property you buy.
3. A Declaration of Trust – This is a legally binding document entered into by joint owners of a property outlining your interest in the property. It can be as simple or as complicated as you like, and your conveyancer should be able to refer you to a suitably qualified person to draft the document for you. A Declaration of Trust often outlines who contributed what to the purchase of the property, how the equity should be divided if it has to be sold, and the circumstances in which the property can be sold.
4. Make a Will: If you do not have a Will, the statutory rules of intestacy would come into force. Unfortunately, these rules do not recognise cohabitation in the same way as married couples. Therefore, without a Will, your estate could be distributed to a former spouse (if you have not yet obtained a decree absolute in divorce), your children or, if there are no children, to your parents, brothers, sisters or other relatives. Making a Will is the best way to ensure that your estate is passed on to the people you would choose.
5. Pensions: It is important to consider your pension provisions and entitlements carefully. Does your pension provider recognise unmarried relationships? Many still do not. To ensure that your pension benefits pass to the appropriate people if you die, make sure you should have completed the “expression of wishes” form.
6. Tax: There are many tax advantages of entering into a marriage which do not apply to an unmarried relationship, even if you live together as a married couple. If you are in a cohabiting relationship, it is wise to consider the potential tax issues and seek advice as necessary.