How a Cohabitation Agreement Can Protect You
In order to protect the interests of those couples, which are not married, yet cohabit together, specialist family lawyers can produced legal contracts called cohabitation agreements. A cohabitation agreement differs from a pre-nuptial agreement in that a pre-nup is created in anticipation of marriage.
It is a common misconception that if you cohabit with another person in a relationship for a number of years, paying the mortgage jointly, that you automatically receive the same equal rights as those awarded to couples in the marital home. This is incorrect. A cohabiting couple do not receive the same protection under the law as a married couple. The following are illustrations which emphasise the difference:
1) Separation - if a married couple divorce and thus divide the family assets accordingly, the marital home (irrelevant of who's name the property is held in) is normally divided 50/50. Subsequently one partner will buy the other out or the property is realised and the proceeds divided. Where you have an unmarried couple cohabiting, it is the partner who owns the property who can stay in the event of a separation - he/she then has the right to remove the other partner and pay no maintenance (unless children are involved).
2) Death - when a married person dies without creating valid will (i.e. has died intestate) then everything they own automatically passes to their spouse or civil partner (subject to intestacy rules. However, if an unmarried cohabiting partner dies, the property belongs to the deceased's estate and thus his/her family (according to intestacy rules), not the cohabiting partner.
In situations such as these the vulnerable cohabiting partner will need to go to court to fight over the smallest of assets to try to prove that their ownership. The Law Commission are considering developing the law in this area, however there have been no real changes to date. As a consequence of this, couples should protect themselves using tools such as cohabitation agreements.
What actually is a cohabitation agreement?
A cohabitation agreement is a contract formed between cohabiting couples that determine what happens to their assets in the case of a separation. The agreement should provide details on the couple's assets, for example; any properties owned, bank accounts held, stocks and shares, independent chattels and any savings held. It will then proceed to provide a valuation for the percentage share each partner holds of the asset. It is also sensible for both parties' to produce a statement showing their independent financial situation (ie highlighting any debts they may owe) at the start of the agreement. This provides the foundation for a couple to decide on how debts would be dealt with if they were to separate.
It is also crucially important to indicate how long you wish the cohabitation agreement to last for. As the document may have an expiry date, it is fundamental that it is kept updated and renewed when necessary. Most cohabitation agreements will be formed as a deed (ie signed as a deed in the presence of an independent witnesses, often lawyers) thus making it legally binding.
A cohabitation agreement prepared by specialist family lawyers can be prepared from as little as £200 and could potentially save you a lot of money if you were to have a unpleasant separation. Do not be fooled - a 'common law marriage' does not exist.
About the Author
Tim Bishop is senior partner at Bonallack & Bishop (http://www.bishopslaw.co.uk ), a firm of specialist cohabitation agreement solicitors specialising in advising couples living together. He is responsible for all major strategic decisions, seeing himself as a businessman who owns a law firm. Tim has expanded the firm by 1000% in 12 years and has plans for its continued development.
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