Tips and Traps for Unmarried Couples
With news that more and more people are choosing to live together and cohabit rather than marry, it is becoming more and more important that they consider what will happen if the relationship breaks down, or if they take the “next step” towards marriage. There is a likelihood that couples who divorce will form new relationships. They may not necessarily want to be fully committed to re-marrying. In some cases these relationships may already have begun before they have been divorced from their first partner, or their finances have been sorted out. Therefore, if a new relationship starts to break down, or a divorcing party dies before the first marriage has been ended and finances have been sorted out, the surviving partner may end up in a significantly worse financial position or even homeless.
It is, therefore, important that couples who are intending to live together, and those who intend to separate take legal advice and consider entering into an agreement which regulates their relationship and what will happen if the relationship ends or they die. In the case of couples intending to live together, this might involve a cohabitation agreement. Couples who have been living together and wish to separate may want to enter into a separation agreement. This applies as much to unmarried as married couples. There are also situations where individuals live together whether by choice or because of their circumstances but are not in a cohabiting relationship. This might include people who are related, siblings, parent and children etc. they may own property together and share their living expenses. A cohabitation agreement would help to regulate that relationship and avoid expensive disputed when things start to go wrong.
Couple who intend to marry might wish to enter into a prenuptial agreement. This will identify the assets and the property they acquired before they married and regulates what will happen to their assets when they split.
In 2014, the Law Commission published a report recommending that Parliament introduced laws to formally recognise what it called “qualifying nuptial agreements” (QNA’s). This was mainly aimed at prenuptial agreements but could apply to separation agreements as well. As the law stands, the divorce courts are not bound by law to recognise prenuptial or separation agreements. The Law Commission recommended that such an agreements should follow a set form and certain safeguards. If so, they would become legally binding on the parties in the event of a divorce. Unfortunately, the government is yet to give any formal response to the Law Commission’s proposals, or introduce any draft legislation to bring in the recommendations. In view of the priority given to Brexit it is unlikely that this will be on the government agenda for some time.
It is worth pointing out that, as the law stands, the court on divorce can over-ride any existing agreement a couple has to divide their assets on divorce. The powers of the court are very wide ranging and discretionary and can take into account the whole of the assets, whenever they were acquired. However, since 2010 and the famous case of Radmacher V Granatino the court has recognised, where parties have entered into an agreement regulating their financial affairs in the event of a relationship breakdown, then the court should uphold such agreements unless :-
- There is evidence that the agreement was not entered into “freely”. i.e. There was a mistake, undue influence, duress, fraud or miss-representation of one parties’ financial relevant circumstances.
- One or more of the parties did not have full appreciation of the effect and implication of the agreement.
- It is, in all the circumstances prevailing, at the time of the application to the court, not fair and reasonable to uphold the parties to the terms. There are various ways that a solicitor can help you sort out which route is best for you. This includes giving you advice on whether and what sort of agreement should be entered into, helping prepare the necessary documents, advising on Wills and trusts and explain the process on divorce following a separation.
So far as unmarried couples are concerned even if they have been living together for long periods of time, they do not enjoy the dame financial security as married couples have. If the relationship breaks down the claims which they have against each other are virtually none existent. Claims are mainly limited to those relating to beneficial interest in property, if that can be established and support of any children of the relationship. There is no provision for spousal maintenance or pension sharing. Parties will by enlarge keep the assets in their sole names. This can also cause a problem should one of the parties die during the marriage. If that is the party with all of the assets the survivor may not receive anything and would have to make a claim under the Inheritance (provision for family and dependents) Act 1975. There are limitations to how far they can take this. There may be little or no entitlement to a share in the pension fund depending on what the scheme’s rules are and whether the deceased has made nomination to the pension scheme trustees. Finally, they may face competing claims by the deceased’s ex-spouse and children.
It is, therefore, important for all couples who intend living together, are living together or want to separate to take independent advice and consider entering into a written agreement regulating their relationship. This is doubly important where one or the other of them asset’s they have required before the relationship or children from previous relationships. It also applies where parties are making unequal contributions to a shared property if property is owned in one person’s name the other is making contributions to mortgage payments or improvements to the property. Parents intending to help children by giving them money towards the purchase of properties may want to protect their “investment” claims by the current or future partner. Children should therefore be urged to consider enter into prenuptial or living together agreements.
Finally, whilst couples who are not married do not, under the current law in England and Wales, acquire the same rights to make claims for financial remedy as married couples do, claims can still arise, particularly with regard to property, jointly-owned assets and responsibility for debts. Couples may have entered into legally binding agreements regarding the sharing of assets or debts. Even verbal agreements can be binding. So far as property is concerned, disputes can arise over ownership, whether or not the property is owned jointly or in the sole name of one person. Therefore, as with married couples who separate and enter into a Separation Agreement if they do not intend to divorce immediately, unmarried couples should consider entering into a written agreement which records any financial arrangements they have and makes it clear that there will be no further claims to be made.
At Temple Heelis we have solicitors who have had many years’ experience in dealing with such matters. If you would like to learn more or if any of the issues highlighted above affect you please feel free to call Andrew Hill on 01539 723757 for an initial 30 minute appointment.
What if you get divorced and you do not sort out the finances at the time?