Regardless of the length of cohabitation or the fact that the couple have children together, the cohabitee may inherit nothing.
The number of families in the UK continues to grow, with the number of cohabiting couple families growing the fastest (ONS, 2017). In this article we look at the legal matters that affect unmarried couples and the legal documents they should have in place to protect their interests.
Above: Based on data from ONS, 2017
Cohabiting couples: legal matters
Cohabitees should discuss matters of home ownership and respective shares with a lawyer.
The way that the family home is held needs careful consideration. If held as ‘Joint Tenants’, each owns a 100% indivisible share. When one dies, the survivor then owns the whole property solely. Problems arise if the survivor remarries, runs into financial difficulty or goes into care later in life.
On the other hand, if the property is held as ‘Tenants in Common’, the absence of a Will can mean the Deceased’s half share is owned by relatives who may force a sale.
Generally we recommend that couples own as Tenants in Common and make a Will, setting out what should happen to their share on death. Using your Will, April King Legal’s lawyers can help you ensure that on the first death, the Deceased’s share is protected for the children or grandchildren even if the survivor remarries, experiences financial difficulties or needs care later on in life.
If the contributions to the property were not even, it is wise to draw up a Declaration of Trust setting out who owns what. There is a presumption that the home is owned in equal shares in the absence of such a declaration3. Whilst intentions may seem clear now, a written record will avoid any problems in the future during a break up or should one party die.
It makes sense to take out a life insurance policy to assist your partner financially in the event of your death. However, under the Section 1 of the Life Insurance Act 1774, the person for whom the benefit of a life assurance policy is made must have an insurable interest in the life of the assured – otherwise the policy will be void and illegal. The interest must be of a financial nature. Whilst marriage is immediately recognised as giving the parties an insurable interest in each others’ lives without the need to prove financial loss, cohabitation does not enjoy the same recognition. To ensure such a policy is valid then, cohabiting couples must be able to show mutual financial support.
Making a Will ensures your loved ones are provided for.
The rules of intestacy do not provide for cohabitees and consequently, the survivor of a cohabiting couple can be left with nothing on the first death.
The exception to this is any property which is jointly owned (such as a family home held as ‘Joint Tenants’) which passes automatically to the survivor on one owner’s death. However, as noted above, there are many disadvantages of holding property this way. If the survivor remarries, gets into financial difficulty or, in later life, goes into care, the whole of the Deceased’s estate can pass sideways outside of the family or be lost entirely.
Even if a cohabiting couple own their home as tenants in common in equal shares, the rules of intestacy can mean that the survivor ends up owning half their home with a family relative.
If a survivor was ‘maintained’ by the deceased prior to the Deceased’s death, they may bring a claim under the Inheritance Act (Provision for Families and Dependents) Act 1975. However, the court can award an unmarried partner only such financial provision as it would be reasonable to receive for maintenance, and the outcome of such claims is by no means certain.
Couples need to discuss what provisions they will make for each other on death. In addition, if the couple have minor children, the Wills should appoint a suitable guardian or guardians.
A Will might appoint a guardian for any children and deal with the division of assets. For more information on this, please see our article Do I need a guardianship clause in my Will?
Cohabitation agreements set out how the family assets are held and who is responsible for what.
A cohabitation agreement sets out arrangements for living together and in addition, defines what will happen should the relationship break down. Although this area of law is still developing, the Courts1 has stated that there was nothing contrary to public policy in a cohabitation agreement.
All cohabiting couples should make a cohabitation agreement – but in addition, where a parent gifts, lends or invests funds to allow a child to purchase their first property and the child wants to cohabit, a parent may wish to insist on a cohabitation agreement to protect the money that has been invested in the property.
A cohabitation agreement can cover:
- How the family home and other assets are held
- How responsibility for finances are to be divided (such as payment of bills)
- What happens when one party wants to sell, such as occupation pending sale, payment of expenses pending the sale, how the property will be valued, how costs relating to the sale will be paid and how the proceeds should be divided.
- Matters relating to children such as their surnames and maintenance (although note that a Court still has the power to review and decide on such matters under the Children Act 1989 and Child Support Act 1991).
Whilst both a Declaration of Trust and Cohabitation Agreement can cover property ownership, the difference between the two documents is that the Cohabitation Agreement can include a lot more detail on practical matters such as who pays the bills and arrangements for the children which would not be appropriate for inclusion in a Declaration of Trust. Where the arrangements between the parties are complex it may be advisable to have both a Declaration of Trust and Cohabitation Agreement and a professional should prepare both to ensure there is no conflict between the two.
Lasting Power of Attorney
A Lasting Power of Attorney sets out who you want to make financial or healthcare decisions for you, should you lose mental capacity
Loss of mental capacity is not an issue that affects the elderly exclusively – this sadly impacts many families at all stages in life, due to accident or serious illness.
Many cohabiting couples are unaware that if one party should lose capacity, the other may lose access to the incapacitated person’s accounts or any joint bank accounts until a Deputyship Order is obtained. There is no restriction on who can apply to be the incapacitated person’s Deputy and although a cohabitee could challenge an application by a third party, it will be expensive, time consuming and stressful for such a matter to proceed to a hearing. There is no guarantee as to who the Court would appoint as a Deputy for the incapacitated person which could mean that going forward, the finances and spending of the cohabitee with capacity may be subject to intense scrutiny.
Further, families can suffer where there is a disagreement over the incapacitated person’s care. Whilst hospitals usually accept your partner as the next of kin, there is little that can be done if they do not.
This is easily avoided by making a Lasting Power of Attorney setting out who should make decisions for you, should you be unable to make them for yourself. There are two types, allowing you to specify who should make financial decisions and who should decide matters of health and care. Your choice of attorneys for each Power can be the same or different.
1 Sutton v Mischon De Reya and Gower & Co  EWHC 3166 (Ch),  1 FLR 837
2 Balfour v Balfour  2 KB 571 and Merritt v Merritt  1 WLR 1121
3 Stack v Dowden  UKHL 17
April King Legal can assist cohabitees with all of the above legal matters. To book a free appointment with one of our lawyers or solicitors, call us on 0800 788 0500 or email firstname.lastname@example.org.