Resolution is an organisation of over 6,500 family justice professionals who work with families and individuals to resolve family issues in a constructive way.
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Resolution regularly campaigns on family policy issues, and this year it is using its Annual Awareness Week, which runs from 27 November to 1 December, to launch its ‘Vision for Family Justice’. The Vision sets out the changes that need to be made to address the current issues facing the family justice system and identifies cohabitation as the next priority area for reform.
Cohabiting couples are the fastest growing family type in the UK, but in England and Wales they have little legal protection, with no safety net in place to protect those who are left vulnerable following separation or death.
Resolution believes the law should better reflect modern society and provide solutions for all types of families, and it is calling for a legal framework of rights and responsibilities to provide some legal protection and secure a fair outcome for cohabitees. These need not be the same rights afforded to married couples and civil partners, but without reform, many cohabitants will be left vulnerable, and in need – if they have no capital and given up work to run the family home, look after children or care for elderly relatives, for example.
Contrary to popular belief, there is no such thing as a common-law husband or wife in England and Wales. No matter how long cohabitees live together, the law (as it currently stands) does not give cohabitees a right to financial support or a share of their partner’s assets when the relationship breaks down. Matrimonial law does not apply to cohabiting couples, so cohabitees are not able make claims for maintenance, lump sum, property adjustment or pension sharing orders.
Unless they hold assets in joint names (or they have a child and the ability to make financial claims for the benefit of that child), cohabitees have no guaranteed rights to property or savings if they separate. They also have no guaranteed rights to benefits under the other’s pension funds or life insurance policies if the relationship ensues but one of them dies.
If there is a dispute about property, the court has broad powers and can make a declaration about parties’ property rights according to property and trusts law, but it does not have a discretionary power to adjust those rights, based on what it considers to be a fair outcome in all the circumstances of the case, or to meet needs.
Many cohabitees do not understand the legal implications of moving in with their partner, or purchasing a property with them, and until such time as cohabitation law is reformed, it is essential for all cohabitees to safeguard themselves, by protecting their legal rights and understanding the potential risks and pitfalls if they fail to do so.
It is also important for them to understand the difference in tax treatment between married couples, civil partners and cohabitees.
There are means by which cohabitees can safeguard their interests, and the interests of their partner, on separation and death.
It is strongly recommended that parties who intend to live together (whether the plan is for one of them to move into a property owned by the other, or for them to purchase a property together) have a cohabitation agreement.
A cohabitation agreement records the parties’ rights and responsibilities in relation to property, and other financial arrangements between them, during their cohabitation and if they separate.
The property may be rented, owned solely by one party or owned by them jointly, either together or with a third party and in equal or unequal shares, and the cohabitation agreement may record matters such as:
(i) in whose name/s the legal title to the property is to be registered;
(ii) how the beneficial interest in the property is to be held;
(iii) how and when the property may be sold, and how the net sale proceeds will be divided;
(iv) any option and mechanism for one party to ‘buy out’ the other’s interest in the property, to avert the need for the property to be sold;
(v) how any mortgage payments are to be met, and whether this will adjust the beneficial interest in the property;
(vi) how a capital contribution by one party to improve the property or reduce the mortgage should be treated;
(vii) how the interests of any third party are to be dealt with, depending on whether their contribution is to be a gift or a loan, or they are to acquire an interest in the property; and
(viii) the impact, if any, of indirect contributions to the property – the payment of utility bills or the costs of decoration and general maintenance, for example.
A cohabitation agreement can also be used to record ownership of personal property such as cars and household contents, which may be used by both parties when they live together but are to be retained by the legal owner if their relationship comes to an end, and arrangements for the operation of bank accounts, the payment of bills and financial support during the relationship.
Cohabitation agreements can be signed in contemplation of parties moving in together, or during their cohabitation, but it is advisable for parties to seek legal advice from a specialist family lawyer at an early stage.
A well-drafted cohabitation agreement, executed as a deed, should avoid disputes and the potential for lengthy and costly litigation at the end of a cohabiting relationship, and be considered by parties in addition to a declaration of trust, not in place of one.
Irrespective of whether parties enter into a cohabitation agreement, all parties who intend to purchase a property jointly, or in circumstances where the beneficial interest in the property is to differ from the legal ownership, should seek legal advice on the implications (in life and on death) of holding the legal title to property as joint tenants or tenants in common, and on executing a declaration of trust recording how the beneficial interest is to be held, as part of the property conveyancing process.
If one party dies, the other does not automatically inherit their share of the family home, or other property and possessions, or have the right to administer the deceased’s estate.
Parties may have lived together for many years, but they are not classed as the other’s next of kin. Unless they are the sole legal owner of the property or hold the property jointly as joint tenants, or they inherit the deceased’s interest in the property by will, they could be forced to sell their home, and have no entitlement to the deceased’s share of the proceeds of sale, as they have no legal rights under the rules of intestacy. The stress and disruption can be very difficult for the surviving party; they could be left destitute, and in some cases homeless.
It is, therefore, important for all cohabitees to seek legal advice and execute a will, in conjunction with any cohabitation agreement and declaration of trust, in which they bequeath their interest in the family home, their personal belongings and other chosen assets to the surviving party whilst the relationship continues.
Nomination of pension benefits
Cohabitees are unable to claim a share of the other party’s pension funds on separation, and they are not automatically entitled to a share of the other’s state pension or any benefits under the other’s private pension funds on death.
It is, therefore, important for cohabitees to complete their pension provider’s expression of wishes form, which names the person/s who they wish to see benefit from their pension fund on their death.
Nomination of life insurance/death in service benefits
Similarly, cohabitees are unable to claim a share of the other party’s insurance benefits on separation, and they are not automatically entitled to a share of the other’s life insurance or death in service benefits on death, so cohabitees should complete each insurance provider’s expression of wishes form, naming the person/s who they wish to see benefit from their life insurance and any death in service benefits on their death.
Cohabitees do not benefit from certain tax advantages which are enjoyed by couples who are married or in a civil partnership, such as the ‘no gain no loss’ provision which applies to capital gains tax on the transfer of assets between the spouses and civil partners, and the exemption from inheritance tax which applies to assets inherited by a spouse or civil partner.
Cohabitees may, therefore, wish to consider estate planning strategies, and structuring the ownership of their assets to ensure the survivor is not left with a large inheritance tax bill that necessitates the sale of property or other assets on their death.
Resolution welcomed the announcement made by Shadow Attorney General, Emily Thornberry MP, at the Labour Party Conference in October 2023, that a Labour government would reform the law for cohabitees. However, there has been talk about reforming the law for cohabitees for many years now, including in a report published by The Law Commission back in 2007, and a report by the UK parliament’s Women and Equalities Committee in 2022, but to date, no government has taken the proposed reforms forward.
Until cohabitation law is reformed in England and Wales, cohabitees should protect themselves and their partners by seeking specialist legal advice at an early stage and taking the steps detailed in this insight.
Sheridans is regularly consulted to advise cohabiting clients on the acquisition of properties, cohabitation agreements, declarations of trust and wills, and to advise on their legal rights and obligations for themselves and the benefit of any children of the relationship if their relationship breaks down.
For legal advice or any further information on the matters covered in this insight, please contact email@example.com. All solicitors in the family team are members of Resolution.