Living Together Agreements – a solution for cohabiting couples?

by Julie Lord

“Going to the chapel and we’re, going to get ma-a-a–ried…”…or not, as it seems. It probably comes as no huge shock that marriage rates for opposite sex couples are on the decline (https://bit.ly/2EY5ngu). In fact, the most recent data suggests that opposite-sex marriages are at their lowest rate on record. 

What does this mean? Are we now a nation of singletons, dwelling alone? Quite the opposite. Whilst marriage rates are declining, co-habitation (https://bbc.in/2Tf2mL8) rates are soaring with more of us living together than ever before.

What’s more, increasing numbers of us are choosing to cuddle up with our partners with no intention of ever getting married. Whilst this may seem logical and unworthy of much consideration, when it comes to your financial rights as an unmarried couple, our reluctance to ‘put a ring on it’ may well call for an ‘uh oh, uh oh, uh oh…’ (and there endeth the Beyonce puns, we promise!).

Financially speaking, married couples are in a much stronger position than those who aren’t. There lies a range of financial security options for the individual and couple to explore, both pre and post wedding.

Prenuptual agreements (https://bit.ly/2TdoiGr), or prenups, stand as an agreement between both parties as to what should happen to assets should the marriage break down. Although not completely legally binding, most courts will uphold the terms agreed should they not prove detrimental to any subsequent children or have been seen to have been entered into via cohesive means. Prenups are particularly useful in second marriages which tend to take place later in life and when both parties may have accumulated wealth and assets over time or in cases of one partner bringing a substantially higher level of wealth into the marriage.

Postnuptual agreements (https://bit.ly/2F9ep7D) are an alternative option for couples who may not have entered into a prenup. The basic principles are the same but a postnup can be drawn up at any point after marriage. They’re often used in cases of high wealth but can be useful for those of us yet to reach oligarch status. A postnup can be a way of each party transparently declaring their wealth and encourages the open and honest discussion about assets in a friendly climate- something which is often impossible during divorce proceedings. It’s also a solid means for whichever partner shoulders the majority of the child care responsibilities (https://bit.ly/2vp4iIC) to ensure that they won’t suffer in later life due to loss of earnings and pension contributions should the marriage break down.

But where does that leave those of us who wish to cohabit but don’t want to wed. Enter, the Living Together Agreement (LTA) (https://bit.ly/2WaUdcz). LTAs (also known as cohabitation agreements), are gaining traction as a means of ensuring cohabiting couples have some semblance of financial rights.

As, under UK jurisdiction, there currently exists no such thing as ‘common law partnerships’, should a relationship breakdown, one party could find themselves in a very precarious financial position. Should one party move into their partner’s home, for example (https://bit.ly/2TIDlNn), and pay contributions towards the upkeep and mortgage of the property, unless they jointly own the home, they will not be entitled to any financial recompense should the relationship end. An LTA is a means of ensuring that both persons are protected. Much like pre and postnups, an LTA can be drawn up and clear instructions listed as to how assets should be split.

As long as both parties instruct separate lawyers and the correct paperwork is in place, it can be an effective way of ensuring cohabitation can be entered into knowing each party is financially safe should the relationship end.

It’ll be interesting to see how, or if, the law adapts as people’s attitudes towards marriage change. In the meantime, if you’re about to embark on cohabitation, we suggest throwing in a little discussion about the value of an LTA – after that 50th piece of IKEA flatpack, you may just need it!

For a general chat about managing your financial assets or if you’re interested in dipping your toe into the financial investment pool but don’t know where to start – get in touch! We’d love to hear from you.

Julie Lord is CEO of Magenta Financial Planning and is always happy to provide basic financial information to help people to get a better handle on their finances and the possible solutions available to them to improve their future security and happiness.

t: 01656 760670

​w: www.magentafp.com

Magenta Financial Planning is Authorised and Regulated by the Financial Conduct Authority.