Starting a relationship later in life brings complications when merging finances since most people have “financial baggage”.
If you’re choosing to cohabit, rather than marry, it’s important to know your rights and take steps to protect the assets you have worked hard for.
Managing finances in a new relationship
It’s not exactly romantic, but once the practical stuff is taken care of you can get on with planning all the fun things. Here’s what you need to know...
Moving into your partner’s home?
If you're moving into your partner's house or vice versa, it’s important for both of you to be clear about the financial implications.
If it’s agreed that the “non-owner” is to contribute to mortgage and bills, then it’s necessary to spell out what that means in terms of whether that person is to have any legal ownership of the property should you split up or sell.
A legal document called a Declaration of Trust can confirm that the non-owner has no beneficial interest in a pre-acquired property. This is to try and prevent a situation where the non-owner tries to assert a claim to the property if you do split.
Buying a new home?
If you buy a home together (and aren’t married), you should take care to protect your assets. Common law marriage is a myth in legal terms. The law doesn’t recognise cohabitation in the same way it does marriage, which means that should you split up, there’s nothing to say who owns what in legal terms.
As well as considering owning a property as tenants in common, you can consider drawing up a cohabitation agreement to detail who owns what, in terms of bricks and mortar as well as furniture and artwork, for example.
You should also use the right legal structure so the property passes automatically to the surviving partner in the event of death. Property purchase contracts can be drawn up as either “joint tenancy” or “tenants in common”. Under joint tenancy, both partners own the whole property, meaning that if one person dies, the survivor carries on owning it. Tenants in common means each partner owns a specific share. Under this arrangement, the share a person has in a property can be left to whoever they choose.
This works well for those who have children from previous relationships. And it will also prevent the surviving partner being forced to move out by their partner's beneficiaries.
Five mistakes people make in their wills
What if we do end up getting married?
If you do end up tying the knot, make sure you consider who will inherit the property (and assets) you own jointly. Where there are children from a previous marriage, a step-parent might not want to leave their assets to step children, should they die first. A will can detail this. Rather than leaving the house outright to your husband or wife, your portion of property and assets pass into a trust for your spouse’s benefit.
This would mean that if your other half survived you, he or she would be entitled to live in the house for the rest of their life.
The terms of the trust would then set out that on their death, your estate would pass to your children, and would not pass according to the terms of your spouse’s will.
Guide to different types of trust
How to find a solicitor
Getting the relevant legal documents drawn up by a solicitor you can trust will bring peace of mind for you both. If you don’t have a solicitor, you can find one at the Law Society.
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