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Saturday, 25 October 2014

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Those cohabiting should make sure they protect their home and assets

More and more people are choosing to live together without entering into the formalities of marriage or a civil partnership. Many couples believe that they will automatically qualify for some protection under the law if their relationship breaks down.

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Working it out: If you live together you need to be aware that there is no such thing in English law as a ‘common law spouse’. When a relationship ends there can be far-reaching consequences

The relationship of cohabiting couples is not recognised as having any legal standing or special status in the eyes of the English legal system. 

If you live together then you need to be aware that there is no such thing in English law as a “common law spouse”. If and when the relationship breaks down then it is each man or woman for themselves.

If you decide as a couple to live together then there are four essential matters that you should attend to:

1. If you run a business together, enter into an agreement to reflect ownership rights.

2. Make sure the house is in joint names, and in appropriate shares.

3. Enter into a cohabitation agreement.

4. Make a Will.

As the law treats cohabitees as separate individuals with no rights or liabilities to each other, when a relationship ends this can have far-reaching consequences, particularly in relation to assets, businesses and family home.

However, the majority of couples fail to consider this until after the relationship has ended. Unlike married couples, cohabitees have no basic rights to their partner’s property or to maintenance if they split up. Basically what is his is his, what is hers is hers, and what is jointly-owned needs to be divided. 

Cohabiting couples who run a business together need to cut out complacency and take appropriate measures to protect themselves and their business should the relationship break down. In such an event the law treats each party as two unrelated individuals with no automatic share of any property.

All businesses should have an agreement to reflect ownership rights. Sometimes accountancy advice is to have an unequal division for tax purposes – fine when everyone agrees – but after a relationship breakdown things may look different.

If a home property is purchased in joint names then it should be split accordingly on separation.

Either party can force a sale of the property to realise their share. If the parties contribute unequally to the property, then this should be reflected by being designated as tenants-in-common and holding unequal shareholdings (say 60 per cent and 40 per cent), rather than the equal shareholdings of beneficial joint tenants. 

If the property is in the sole name of one party then basically it remains that person’s property on separation, unless the other party can establish that there was a common intention that they would be entitled to a share in the property.

The parties can, of course, come to an agreed settlement, but if not, such disputes can become messy and expensive. 

It is quite legitimate and prudent for unmarried couples to enter into a cohabitation agreement when they start living together to try and cover any disputes on property if they should split up. Protection of wealth and assets is worth considering.

If you own your property as joint tenants and your relationship breaks down, one of the first things that you should do is to sever that joint tenancy.

This converts the joint tenancy into a tenancy in common, which means that you will have a distinct share in the property that will NOT automatically pass to your former partner.

A business agreement and cohabitation agreement can give financial security with protection of wealth and assets to those who are in a committed relationship but do not endorse the idea of marriage.

A cohabitation agreement is a contract between the two partners in a relationship, which is legally enforceable as long as it adheres to the requirements contract law. To make sure that is in indeed legally enforceable, both parties should consult a solicitor before signing it.

A cohabitation agreement will make provision for a breakup by determining entitlement to assets.

Another essential matter for cohabitees to consider is what might happen when one of them passes away.  

Unless they make a will in favour of their partner, then, should they die, their estate will pass under the intestacy rules intestacy rules, rather than to their companion. This may not be what you want.

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