Susan J Williams Partner and Head of Family Department (Cardiff)
Q&A: Why should you consider a co-habitation agreement?
According to a statistic from STEP, more than three million couples in the UK choose to co-habit, rather than marry or enter a civil partnership. However, unmarried couples who live together have far fewer legal rights than couples who are married or in civil partnerships. The concept of the ‘common law’ spouse is just a myth and not recognised in the law. As a result, co-habiting couples who are in the process of separating cannot access the financial orders as separating spouse.
Co-habitation agreements allow you to make financial arrangements in the event that your relationship breaks down. However, there are several misconceptions about co-habitation agreements. I am frequently asked the same questions from couples who are considering creating a co-habitation agreement:
What is a co-habitation agreement?
A co-habitation agreement is a document which sets out the financial arrangements between a couple who decide to live with one another, but who do not want to get married or enter into a civil partnership.
A co-habitation agreement provides a comprehensive package for the private individual which sits in their portfolio of documents alongside their Will and Powers of Attorney and any Deed of Trust regarding the ownership of property.
Who do they apply to?
A cohabitation agreement can be drafted for unmarried couples, both heterosexual and same-sex couples, who live together.
Why are co-habitation agreements so important?
A co-habitation agreement is so important for couples to create, as it clearly sets out who owns the assets at the commencement of the relationship; what is to happen in respect of ownership of assets acquired during the relationship; and how the assets are to be divided should the relationship come to an end.
As a result, co-habitation agreements provide certainty as a relationship develops, and they save a lot of time and money in the event that the relationship ends, avoiding expense legal fees.
Why are co-habitation agreements relevant during the current COVID-19 pandemic?
When the country went into lockdown on 24 March, these extraordinary circumstances meant that many couples were making a snap decision whether to live with their partner or not. These changes have fast-tracked many relationships; where couples did not want to live apart in their own households during the current lockdown measures.
As a result, thoughts about the long term financial consequences of co-habiting were unlikely to be at the forefront of their minds. However, these couples may now have the time and space to have open and honest discussions about their future and financial commitments with one another.
In addition, there will be many individuals who inherit money and assets, following the sad death of a family member due to coronavirus. These individuals may want to protect these assets, with the fear of becoming shared money or assets. A co-habitation agreement can be the vehicle to provide the security of these assets.
What do co habitation agreements cover?
A cohabitation agreement covers a wide range of issues including:
- The ownership of property.
- How expenses are to be paid (e.g. mortgages, rent, household bills).
- How joint account are to be set up and how is it regulated.
- Provisions for savings.
- Provisions in relation to pensions and life policies.
- Responsibilities regarding debts.
- Child maintenance provisions.
- Arrangements for pets.
- Provisions in relation to cars, valuable items and contents.
The aim is that the co habitation agreement should be comprehensive in its detail but not contain trivial matters.
Are co-habitation agreements legally binding?
Co Habitation agreements are legal documents which are recognised as legally binding contracts, if they are properly executed.
What happens if the couple decide to get married?
If the couple decides to get married, the terms contained in the co-habitation agreement will come to an end. However, these terms can form the foundation of a pre-nuptial agreement; a document which regulates the financial circumstances of a couple once they are married.