Financial Rights for Unmarried Couples Living Together

It's increasingly normal for partners to opt for cohabitation before marriage, or to live together without ever getting married. It's important to note that couples who live together without being married do not have the same legal rights if the relationship breaks down compared to those who are married. Understanding the difference is vital when it comes to resolving disputes or navigating the complexities of a relationship breakdown.

While it may be uncomfortable to contemplate the potential end of a committed relationship, being informed about the possible outcomes regarding your property, assets, and children in the event of separation is crucial. This knowledge is key in preparing for any future uncertainties, ensuring that both parties are aware of their rights and can take steps to protect their interests.

Understanding Cohabitation Laws in the UK

There's a common myth that living together for a certain period automatically grants unmarried couples the same legal status as married couples.  This is often referred to as "common law marriage". However, this notion is incorrect. The idea of common law marriage was abolished back in 1753, meaning cohabiting couples do not acquire legal obligations towards each other simply through the act of living together, regardless of how long they've been doing so. This clarification is crucial for those navigating the intricacies of cohabitation without the legal safety net marriage provides.

The current legal stance on cohabitation in the UK has been the subject of criticism, viewed by many as archaic. This legal gap most significantly impacts women, particularly those who have paused their careers to focus on childcare, leaving them vulnerable financially upon separation. Furthermore, ethnic minority women in religious communities face challenges, as marriages conducted solely through religious ceremonies may not fulfil legal requirements, exacerbating their vulnerability.

Efforts to reform these outdated laws have been ongoing. The Women and Equalities Committee of the House of Commons, in August 2022, advocated for substantial reforms to better reflect today's family dynamics. Their proposals included a campaign to dispel the myths surrounding "common law marriage" and the introduction of an opt-out cohabitation rights scheme to protect individuals upon the dissolution of a relationship. 

Despite these recommendations, the UK government has yet to adopt significant changes. Until reforms are enacted, many cohabiting couples will continue to face legal challenges concerning the division of assets, finances, and childcare responsibilities should they separate.

Finances and Cohabitating

In committed relationships, whether the couple is married or not, it's common for partners to open a joint bank account to manage collective expenses such as housing, groceries, and utilities. This choice depends on individual preferences, with some opting to maintain separate financial accounts. It's crucial to recognise that a joint account might affect your credit rating if your partner has a poor credit history or neglects to fulfil payments from the shared account.

Moreover, in the event of a separation, either party can withdraw the entire balance from the joint account, leaving the other with little or no recourse to reclaim those funds, even with proof of individual contributions. Therefore, it's prudent to seek legal advice promptly after separation to prevent any unfair financial advantages.  You may wish to ask the bank to freeze the account however that may not be possible if you have active direct debits being taken from that account.

Upon the dissolution of a marriage, the starting point is often that the assets built up during the marriage will be divided equally. However, this does not apply to unmarried couples, where each individual retains their private finances and property, and any shared assets are divided equally. Disputes over asset division are resolved on a case-by-case basis in accordance with civil law.

In scenarios where inheritance is used to pay off a joint mortgage while cohabitating, it may be impossible for the party whose inheritance was used to reclaim those monies on separation unless the appropriate documentation as been signed by the parties at the time the payment was made.  

Additionally, unmarried individuals will not be entitled to any form of “spousal maintenance” after a breakup.

In England and Wales, if children are involved, regardless of marital status, and unless there is an equal shared care arrangement, the parent who has the children for the least nights is financially obligated to the other parent to pay “child maintenance”. The amount they will have to pay is dependent on how much they earn and how many nights they have the children.  This “child maintenance” can be quite limited. In most cases, it will be assessed by the Child Maintenance Service who simply apply the government's proscribed formula.  Unlike “spousal maintenance” for married couples, there is no discretion to look at the receiving party’s needs.

Property and Cohabitation

Property disputes that emerge amidst the separation of cohabiting partners often present a complex challenge. When the property in question is solely owned by one partner, the difficulty of the situation increases. Should the relationship come to an end, the partner not listed as the owner may still stake a claim to the property through the establishment of a ‘trust’.

Such a trust implies an unwritten agreement between the cohabiting partners concerning the property, typically rooted in their financial contributions or actions towards the home. For example, a trust could be recognised if one has invested in home improvements or contributed financially to the property they reside in with their partner, despite not being the legal owner.

The burden of proof, however, lies with the partner lacking formal ownership. They must demonstrate the existence of a 'trust' by showing consistent contributions towards the mortgage or evidence of their investment in the initial down payment. Proving that there was an oral or written agreement with the legal owner about their equity in the property, can be particularly challenging without tangible evidence.

Disagreements can also persist in situations where the property is jointly owned, especially if one party is unwilling to leave or put the property on the market. 

Should attempts at negotiation fail, legal intervention may become the only resolution. It's crucial to acknowledge the intricate nature of these legal battles and the difficulty in gathering the necessary evidence to substantiate a claim to a financial interest in the property.

What happens if one member of a cohabitating couple, that aren’t married, dies? 

The conclusion of a partnership isn't always a matter of choice, and it's essential for unmarried couples living together to prepare for what will happen to their assets upon one partner's death.

Should one partner die without leaving a Will, cohabiting couples without a marriage certificate do not automatically inherit. Instead, the distribution of the deceased's estate is determined by 'intestacy rules', which do not recognise unmarried partners as beneficiaries.

Nevertheless, the surviving partner has the option to pursue a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (referred to as the '1975 Act'). This act provides a pathway for them to seek financial provision from their deceased partner’s estate, applicable when the deceased left no Will or their Will fails to make sufficient provision for the surviving partner. Claims must generally be filed within 6 months following the issuing of the Grant of Probate or Letters of Administration, though there are exceptions under specific circumstances.

According to the 1975 Act, surviving partners may be entitled to reasonable financial support, taking into account various factors including; both parties' financial resources and needs, other claimants' resources and needs, any beneficiaries' needs, the overall value of the deceased's estate, any disabilities, and other pertinent considerations.

Additionally, unmarried cohabiting couples are advised to take extra steps to ensure the financial security of the surviving partner. This includes making arrangements regarding pension benefits, which may not automatically transfer to a cohabiting partner upon death, and considering life insurance, as unlike married couples, cohabiting partners are only eligible for Bereavement Support Payment if they are cohabiting parents with dependent children and meet eligibility criteria, thus life insurance offers a safety net in the event of a partner’s demise.

Cohabitation Agreements

Opting to live together without the formalities of marriage or a civil partnership brings its own set of challenges, particularly when it comes to protecting your financial interests. 

A practical solution is entering into a cohabitation agreement. This legal document is designed to outline the rights and responsibilities of partners living together, covering aspects related to property, finances, and more, both during the relationship and in the event it ends.

Such agreements are comprehensive, extending to details like child support, management of joint bank accounts, debt responsibility, allocation of household expenses, vehicle ownership, and even the care of pets. Though it might sound somewhat cautious, having a cohabitation agreement in place is similar to establishing a prenuptial agreement before marriage. It provides clarity and security, ensuring both parties have peace of mind by clearly setting out what happens to their assets and responsibilities.

The benefits of a cohabitation agreement include minimising disputes over asset ownership, allowing for financial independence, and safeguarding each individual's assets. It’s advisable to draft one of these agreements early in the relationship, though they can be formulated at any point. Regular reviews and updates are recommended, especially following significant life changes. 

At Hegarty, our approachable legal experts can advise unmarried couples on protecting their rights and interests, offering support through relationship changes or disputes, and providing guidance tailored to each unique situation.