It is important to remember that living with a partner or getting married can have significant legal implications. Statistics show that couples are marrying later in life, the rates of cohabiting couples are on the rise, and there has also been an increase in remarriage rates among the older population. Statistics also show that more than 50% of marriages end in divorce.

We spend our lives hopefully generating wealth, often through hard work, sometimes through inheritance following the death of someone we love, and very occasionally, through sheer luck, having won a particular competition or lottery. As we approach retirement, our hope and goal is to have enough so that we can live comfortably and leave something for the generations of our family that follow.

To understand why it is important to protect wealth when entering a relationship, it is helpful to consider what could happen if no steps are taken to protect yourself against the claims that a partner could bring against you on separation. The implications are different for those who cohabit and those who marry.

Divorce

In divorce, a couple has claims against one another for property, lump sums, maintenance, and pensions. The court has an extremely wide discretion to determine those claims as it sees fit, taking into account all the circumstances of the case.

Protection can be put in place to protect assets, for example, those which have been pre-acquired or inherited, by using a nuptial agreement. A nuptial agreement sets out what a couple agrees to and legally records what will happen if their marriage breaks down in the future. Provided the agreement is fair and meets the needs of the parties, it is likely to be upheld if:

• It is freely entered into
• Both parties have independent legal advice
• They fully understood the meaning and implications of the agreement
• Financial disclosure was provided
• (In the case of a pre-nuptial agreement) it was signed at least 28 days before the wedding.

Cohabitation

The law relating to cohabiting couples is very different for married couples. The court does not have the same wide discretionary powers that it does when a couple divorces. The law that applies here will depend on whether or not the couple has dependent children.

If they have no dependent children, then their claims are mainly governed by the Trusts of Land and Appointment of Trustees Act 1996. This act gives the court the power to determine the extent of beneficial interests in property, such as the home. Where a property is owned by just one person, there is a legal presumption that the property (and the equity in it) belongs entirely to them. However, certain circumstances can displace this legal presumption. For example, if the non-owner has made a significant financial contribution or if they have been assured they have an interest in the property and have relied on that assurance to their detriment,

When a property is owned jointly, it can be owned in one of two ways. If they own as beneficial joint tenants, there is a legal presumption that they each own the whole of it and, in effect, have equal entitlement to any sale proceeds. This is the case even if one of the parties (or their parents) has put down a large deposit. If they own it as beneficial tenants in common, then they own it in the shares stipulated at the time of purchase—often in the transfer deed we call TR1. If couples do not record their agreement at the point of purchase in writing or in the TR1, this can lead to significant disputes and legal costs if the relationship breaks down in the future.

In addition to determining the ownership of their home, Schedule 1 of the Children Act 1989 provides a cohabiting couple with dependent children with potential claims against each other. Under that act, the court has very similar powers to those it has on divorce, namely, to make orders for property, lump sums, and maintenance for the benefit of the child. The court does not have the power to share pensions under Schedule 1. Any order will generally only be made for the benefit of the child during their minority or ongoing education, not in favour of the parent, and not indefinitely.

Cohabiting couples who wish to protect the wealth that they bring to a relationship would be wise to ensure that;

• If they own a property jointly, there should be a clear record of their intended shares in a Deed/Declaration of trust, or at the very least in the TR1
• For joint owners, but even more importantly, for sole owners, it is wise to have a Cohabitation Agreement. A cohabitation agreement can set out exactly what will happen if a couple separates, so there is no room for debate or confusion. It can go way beyond a TR1, or Deed of Trust, and document how a property will be valued if it is sold or if one will buy out the other – it can even set out the custody of the family pet! As long as it has been properly entered into and has not been displaced by subsequent events, these kinds of protective documents are likely to be upheld by the court.

Sadly, many couples do not seek to protect themselves. For some, it can be difficult or unromantic to broach financial topics. Costs can also be a deterrent, but when done right, the cost of a nuptial agreement is much like a form of insurance and is minor in comparison to the financial and emotional costs that an acrimonious divorce or separation may involve.

As a client of Birkett Long, you have access to the best solicitors specialising in family law who are available to provide you with the advice you need to ensure the best outcome for you and your family, together with the empathy and desire to help resolve issues in a way which preserves your and your family's dignity, avoids inflaming the situation, and keeps your costs to a minimum. We can advise you on all aspects of wealth protection, whether in relation to nuptial or cohabitation agreements or if the worst happens and the relationship breaks down.

At Birkett Long LLP, our specialist family solicitors can advise on all aspects of family law. With our assistance, you can be confident that you will achieve the right outcome. We have experience in all forms of dispute resolution and can, in many cases, assist in reaching a fair resolution without an application having to be made to the court and the associated costs of doing so.

We offer a free initial 15-minute, no obligation telephone call with our solicitors to discuss your requirements. I can be contacted on 0330 818 3108 or via email at karen.johnson@birkettlong.co.uk.