The financial risks of cohabitation

The financial risks of cohabitation

Siobhan Jeffels on the financial risks of cohabitation and why a change in family law is needed to protect the increasing numbers of couples who opt to live together rather than marry

Couples who live together have been the fastest growing family type over the last 20 years – with numbers doubling from 1.5 million to 3.3 million between 1996 and 2016.

Yet cohabiting can leave people at enormous financial risk – and even homeless – should their relationship break down because, unlike married couples, they have no automatic legal rights specific to their status as cohabitees.

Instead, they are often reliant upon principles of land and trust law to determine any dispute as to ownership of property. This can lead to technically complex and expensive litigation.

According to research, almost half (47%) of the British public believes in the myth of “common law marriage”. Worryingly, even some financial institutions seem to perpetrate the myth. When I went online to renew car insurance recently I found that “common law spouse” was an option in a drop-down menu.

Two cases in the last year have highlighted the financial implications and risks of cohabiting. The most recent, a landmark Supreme Court ruling, could pave the way to improving pension – and other financial rights – for cohabiting couples.

The ruling, which gave Denise Brewster the right to her late partner’s occupational pension, hinged on the fact that Ms Brewster was discriminated against because she was not married to her late partner, Lenny McMullan.

Ms Brewster and Mr McMullan lived together for ten years and owned their own home. They became engaged just two days before Mr McMullan died. However, Mr McMullan failed to fill in a nomination form for public sector workers who want their partners to share in their pension upon death. Married couples do not have to complete the form.

Last year, Judge Nigel Gerald ruled that grandmother Joy Williams could make a claim against the estate of Norman Martin, a married man with whom she had lived for 18 years.

Mr Martin’s marriage had not been dissolved and on his death in 2012 – and in the absence of a will – his share in the home he shared with Joy Williams for many years passed across to his estranged wife.

This case hinged on the fact that Mr Martin had not updated his will to include his partner. Joy Williams and Norman Martin lived in a property owned by them as “tenants in common” so their respective shares in the property would pass upon their death in accordance with the terms of their wills or, in the absence of a will, in accordance with the rules of intestacy. Mr Martin had not updated his will and so his wife inherited his share under the terms of his will.

Joy Williams challenged the will under The Inheritance (Provision for Family and Dependants) Act 1975. The judge, who commented that the couple had lived as “man and wife” in a “loving and committed relationship”, found his share in the property should instead pass to Joy Williams to secure her future there.

The case resulted in substantial legal fees, with Mr Martin’s widow ordered to pay £100,000 towards the costs of the litigation.

Both of these cases have again ignited the debate around legal rights for couples who choose to cohabit rather than marry. Until there is a change in legislation, I advise couples who live together to have a cohabitation or “living together” agreement. This formalises their relationship, setting out what is to happen to their assets in the event that one of them dies or if the relationship should break down, as well as dealing with day-to-day matters such as who will be responsible for paying bills or school fees, for example.

Cohabitation agreements are frequently used to protect the interests of an existing homeowner whose new partner will be moving in, or where one party is contributing more capital to the purchase of a jointly owned property.

Resolution, the national association of family lawyers, continues to lobby for cohabitation legislation. In light of the continuing rise in the numbers of people cohabiting, a change in the law cannot come soon enough.

Siobhan Jeffels is an associate at Silk Family Law’s North Yorkshire office. She is a Resolution accredited specialist in advanced financial provision and children work

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