Category Archives: Insight Article

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This increasingly popular family type grants cohabiting couples limited legal protection. Unlike in a marriage or civil partnership, cohabiting couples have no recognised legal status in the UK. With England and Wales still having a considerable gender pay gap, amongst other gendered issues, the lack of legal rights disproportionately impacts women. As the Women and Equalities Committee report from August 2022 stated, “The lack of legal protection on family breakdown means that women, including women from an ethnic minority background and those who have had religious-only weddings, can suffer relationship-generated disadvantage.”

Contrary to popular belief, the UK does not recognise ‘common law’ marriages. As a result, cohabiting couples have limited options, and many need to be made aware of what could happen to their assets if they were to separate. Currently, the most effective means to protect an unmarried couple is to enter into a trust deed and/or a cohabitation agreement.

The family home

The family home is often the most valuable financial asset a couple owns during their relationship. However, making a financial claim against the family home depends entirely on ownership. In determining this, it is essential to consider whether the parties are joint owners, on what terms, and the amount contributed by each towards purchase, mortgage, and even significant repairs to the property.

Joint ownership gives both parties equal rights to stay in the property. If necessary, either joint owner can apply to the court for an order for sale. It is difficult, save in certain limited cases, to prevent the sale of a jointly owned property.

The position alters if there are any children under the age of 18. In those instances, one party may establish their need to remain in the property until the youngest child turns 18. In this scenario, the joint owners then divide the property’s equity at that later stage. Although this may deprive one party of their share in the capital, it resolves any housing problems for any children and the primary carer. The court will always consider the welfare of children as a priority.

If the family home is owned solely by one partner, the other may have little to no legal rights to remain in the house if their partner asks them to leave. They may, however, be able to claim a ‘beneficial interest’ in the property by getting the court to formally recognise the same, whether by reference to contributions or another legal principle.

Capital

The presumption regarding capital, including money in banks, expensive items, interest in insurance policies and other investments, are treated as belonging to the person whose name they are in at the time of separation. To establish otherwise, it may be arguable that capital was held in trust for the other.

Individual maintenance

Cohabiting couples are not entitled to claim financial maintenance from their partners in the same way that married couples can. However, the situation is different where dependent children are involved. For example, the parent who remains in the property or resides predominantly with the children (until the youngest child turns 18) may be able to claim child maintenance income.

Child maintenance

Parents have a legal duty to support their children financially. Hence, the parent living with the children after separation is entitled to child maintenance payments from the other parent. In most cases, this is not dealt with by the court. However, the parent with the day-to-day care of the children can apply to the Child Maintenance Service for child support unless a level of maintenance is agreed upon amicably. The parties may make other claims over children, but parties should seek expert legal advice before considering those options.

Pensions

These cannot be divided or shared between cohabiting couples who are separating.

Whilst together, or as part of estate planning, certain pension schemes make it easier to provide for your partner when you are unmarried and cohabiting, usually through the scheme member making an ‘expression of wishes’ declaration as to who benefits from their pension.

Cohabitation agreements

Unmarried couples living together can enter into a cohabitation agreement. It can establish the couple’s rights and responsibilities towards each other during their separation or death. It can seek to regulate interests in property and other finances and consider child arrangements and expenditures. It can potentially prevent the strength of future claims against property and finances upon either party’s death or a breakdown in their relationship.

Cohabitation agreements are becoming increasingly popular as they cover all aspects of joint life and prepare for the consequences of a potential split-up by offering reassurances for both parties and their assets. Well-drafted cohabitation agreements can provide certainty akin to if the couple were married. However, the law surrounding those agreements is less protective than those that assist married couples.

Cohabitation agreements are not automatically legally binding but provide clarity and show the parties’ intention.

The Women and Equalities Committee report made some excellent recommendations to improve the legal position for cohabiting couples and raise much-needed awareness of the issues. There have also been numerous bills put before Parliament for consideration.

Unfortunately, in November 2022, Parliament confirmed it would not consider further readings of the latest Cohabitation Rights Bill during the 2023/24 parliamentary session. The wait for real and much-needed reform continues.

Taking clear advice when purchasing a property or joint assets and entering into a cohabitation agreement and trust deed are the best routes for unmarried couples wishing to protect their interests.

Call family solicitor Pippa Marshall today to discuss your position and formalise your living arrangements.

Note: This article is not legal advice; it provides information of general interest about current legal issues.

Photo by Cytonn Photography on Unsplash

Research commissioned by The Marriage Foundation found that one in five UK marriages have utilised marital agreements. Marital agreements have recently become a focal point for couples who consider financial planning an essential marriage prerequisite. While many may think preparing for a marriage breakdown is unromantic, others view it as an essential part of financial planning and a vital security measure to safeguard their future. 

What are marital agreements?

A marital agreement is a written agreement entered into by a couple seeking to regulate their financial position should their marriage break down. A couple can enter into a marital agreement before marriage (known as a pre-nuptial agreement or prenup) or during a marriage (known as a post-nuptial agreement or postnup). 

Marital agreements set out the present ownership of assets and the intended future ownership of such assets in the event of a divorce. Such agreements define matrimonial, non-matrimonial, and joint and separate property. However, they can also deal with income, future earnings and interests under trusts and financial provisions for children.

Why enter into a marital agreement?

Couples enter into marital agreements to provide certainty, protect their assets, and clarify how they will conduct their financial affairs during and after a marriage. 

The law 

No specific law relating to marital agreements currently exists. Therefore, they do not override a court’s decision or automatically bind the courts upon divorce.

When considering the role of a marital agreement in divorce proceedings, the starting point is the Matrimonial Causes Act 1973. Section 25 of that Act obliges a judge to consider all the relevant circumstances of the case when deciding how to divide the parties’ finances on divorce. The courts will consider whether a marital agreement meets specific procedural and substantive safeguards when determining whether to uphold it.

The law relating to the fairness of marital agreements lies in the Supreme Court judgment in the case of Radmacher v Granatino. This decision provided the courts with guidance on the discretion to be applied when determining whether a marital agreement should be given ‘decisive weight’. The courts will assess fairness by considering the following criteria:

1. The agreement must be freely entered into, which means that both parties must enter into the agreement of their own free will, without any pressure from each other or anyone else.
2. The parties must have a full appreciation of the implications of the agreement. 
3. Holding the parties to their agreement, in the prevailing circumstances, must be fair. 

Legislative reform

In 2014, the Law Commission published its Matrimonial Property, Needs and Agreements report. The report recommended legislative reform to make marital agreements that are in a prescribed form and adhere to certain safeguards to be legally binding. If an agreement met the Commission’s criteria, the courts would class it as a “qualifying nuptial agreement”. A qualifying nuptial agreement would prevent the courts from making financial orders on divorce inconsistent with the terms set out in any marital agreement unless an order is needed from the court to meet one of the parties’ financial needs or to benefit a child of the family.

Nuptial agreements that do not adhere to the criteria would continue to be treated as a ‘relevant factor’ by a judge deciding what financial orders to make on divorce.

A qualifying nuptial agreement must meet the following criteria:

1. The agreement must be contractually valid. 
2. The agreement must be validly executed as a deed and contain a “relevant statement” signed by both parties confirming that they understand the agreement is a qualifying nuptial agreement that will remove the court’s discretion to make financial orders on divorce except to meet financial needs.
3. The parties cannot enter into an agreement within the 28 days preceding the wedding.
4. Both parties to the agreement must have received disclosure of material information about the other party’s financial situation when entering into the agreement.
5. Both parties must have received legal advice when they entered into the agreement.
6. The agreement must not prejudice any children. For example, if the agreement makes insufficient financial provisions for children, it will be set aside by the court.
7. The agreement must meet both parties’ needs regarding the standard of living during the marriage. Provision for needs is not limited to an income stream; it includes capital provision and the long-term provision of a home. The possibility of ongoing financial provision for a party caring for children is essential. The court would not uphold an agreement that results in a party receiving very little or nothing.

While the government has not yet issued its final response to the Law Commission’s proposals, some of the proposed reforms may become law in due course. Accordingly, it is vital to remember the Commission’s recommendations to ensure a marital agreement complies with the suggested requirements for a qualifying nuptial agreement. Complying with these requirements will mean that the marital agreement has the best chance of being legally binding in the future and will provide parties with as much clarity and certainty as possible regarding the division of assets in the event of a marriage breakdown. In addition, thinking ahead will save parties the stress, time and legal costs of contested financial proceedings.

Financial planning

No set criteria make some couples more eligible to enter into marital agreements. Certain factors may motivate some couples more than others to protect their wealth before they tie the knot.

Couples have often used marital agreements to ring-fence inheritance, family businesses and valuable family assets such as heirlooms from the ‘matrimonial pot’. Recently, more and more couples have opted for marital agreements to protect and preserve assets for the benefit of their children from a previous marriage.

Often, the only purpose of having a marital agreement is simply because one party had acquired significantly more wealth than the other before the relationship began. Therefore, the wealthier party wishes to protect their wealth in case of a marital breakdown.

Protecting family assets and inheritance

In the event of a divorce, marital agreements can play a significant role in allowing a spouse to retain their shareholding in a generational family business established before the marriage.

It is common for owners of family assets to ensure that gifted and inherited assets do not become the property of the non-blood-related spouse in the event of a divorce. Therefore, that spouse cannot claim from the asset. In this scenario, couples often use a marital agreement to outline alternative housing provisions and identify other assets and resources to meet income needs. 

Conclusion

With divorce rates significantly increasing year after year, it is wise for couples to consider discussing marital agreements, either before or during their marriage, as a financial planning tool and to seek independent legal advice to ensure its validity and fairness so that the court can give weight to it in any future divorce proceedings.

Call family solicitor Pippa Marshall today to find out how she can help you plan for your future.

Note: This article is not legal advice; it provides information of general interest about current legal issues.