Financial protection and rights for unmarried partners and unmarried parents in the event of a break-up

According to the Office of National Statistics, in 2019 there was a decline in marriage rates in the UK with some couples choosing to cohabit instead. There remains a general misconception that unmarried cohabiting partners have the same legal and financial rights as those who are married under the principle of being common-law partners or having a common-law marriage. However, this is not the case, and this distinction is especially important when considering financial matters following a breakdown of the relationship.

Following a breakdown of a marriage, a spouse can rely on the Matrimonial Clauses Act 1973 (MCA), which provides a right to a financial claim against all assets of the marriage regardless of how the assets are held; however, this right does not extend to unmarried cohabiting partners. Cohabitees’ rights are limited only to assets held in joint names. If the family home is held in the sole name of one partner, the other partner can only make a claim if they can prove they have a beneficial interest in the property
by establishing a Resulting Trust, a Constructive Trust, or Proprietary Estoppel (we talk more about this in our next article).

In essence this means that upon a breakup, there is no automatic legal entitlement to assets held in the other party’s sole name, including but not limited to property which the parties are not living in, pensions, or savings. This is regardless of the duration of the relationship or if there are any children of the relationship.

If there are children from the relationship, an unmarried parent can still apply for child maintenance depending on how much time the children are spending with each parent and the disparity in the respective incomes of each parent. In certain circumstances, it is also possible for an unmarried parent to make an application under Schedule 1 Children Act 1989 for ‘top-up maintenance’ or a property transfer for the benefit of the children. Under s.14 Trust of Land and Appointment of Trustees Act 1996, a non-married parent can also ask for the sale of the family home to be delayed until the children are adults and financially independent.

Although there are options available to unmarried partners to help provide some protection in the event of a breakdown of the relationship, the law in this area is very ambiguous. The party claiming a financial interest would need to prove their case with documentary evidence in support and/or circumstantial evidence. In the absence of any written agreement between the parties, it would be a case of one person’s word against the other.

Cohabitation Agreements

Cohabitation agreements allow both partners to clearly set out their expectations, responsibilities and obligations in the relationship and confirm how assets are to be dealt with and distributed if the relationship breaks down. Similar to how married couples enter into pre-nuptial agreements, a cohabitation agreement can show intention and offer protection and security to both parties. The agreement can set out how the parties will manage their finances in the event of a relationship breakdown, specifying who owns what and in what proportion. It can cover a wide range of areas such as how a property and its contents is to be divided; it can provide for the division of pensions, savings, personal belongings, inheritance, and specify next of kin, who keeps the pets, and who pays off any debit and household bills in the event of a relationship breakdown.

The terms of any agreement should be reviewed periodically as and when there are any changes in circumstances, such as children or new property/assets being purchased. In this way, both parties know where they stand, and expectations can be managed to prevent or minimise arguments following the breakdown of a relationship.

Although the agreements can be relied on to show intent, they are not technically legally binding. Although the agreements can be enforceable, there are no guarantees that the agreement (all or part) will be upheld in court. The terms of the agreement must be carefully and specifically drafted. Raising the subject to a partner can also potentially lead to an uncomfortable conversation and will need to be approached carefully and sensitively.

The court is likely to place weight on a Cohabitation Agreement which has been properly drafted and executed, provided there are no overriding circumstances which render any of the provisions invalid. For example, if an agreement states that one partner is not to have a beneficial interest in a property, but there is a Declaration of Trust stating that that the partner is to receive a certain percentage of the net proceeds in the event of a sale, the existence of the Declaration of Trust may override the provision in
the Agreement stating that that partner has no beneficial interest.

The existence of a Cohabitation Agreement which is entered into freely by both parties and with each having had the opportunity to exchange information about their respective financial positions, is more likely to be upheld by the court. It is also important that both partners have been given the opportunity to take independent legal advice without unreasonable time pressures being imposed.

Declaration of Trust

When unmarried partners jointly own property, it is advisable that they agree and sign a Declaration of Trust outlining how the proceeds of sale will be divided upon the property being sold. A Declaration of Trust allows the parties to clearly specify their respective financial shares of the property, thus protecting their own and any third-party interests.

Declarations of Trust are particularly helpful when one party may have contributed more to the purchase of the property than the other, or where a third party (often a parent) has financially contributed towards the property.

Should one party continue to significantly contribute to the property financially, for example by making higher mortgage contributions or by paying or carrying out renovations to the property (leading to an increase in value), the Declaration of Trust can be drafted and/or updated to reflect the proportionate increase in their beneficial entitlement.

Although the prospect of discussing Cohabitation Agreements and Declarations of Trust might seem quite challenging and unnerving for an unmarried couple entering into new living arrangements, the benefits of having both these documents drafted, agreed, and signed, can minimise the stress and unpredictable turns that life can otherwise take.