6 steps to protecting yourself financially

Many couples, who are living together, believe that they're legally protected and that their partner is viewed, in the eyes of the law, as their 'common law spouse'. But this isn't true. 

If you're cohabiting, you may be putting yourself in financial danger. There can be a lack of financial protection, both presently and in the future, for cohabitees should their partner die or unmarried couples split up.


Philippa Pearson, a family lawyer, says: "There is no such law as 'common law marriage' and you're legally not viewed as a 'common law spouse'. In fact, couples have no financial rights if they separate, no matter how long they have been living together or how many children they have had together.

"There is also a grey area regarding parental responsibility. If one of the couple dies and neither of them has made a will, the partner has no legal right to the other partner's property. So it's always important to get things down in writing to protect yourself in any eventuality."

Here are six steps to how you can protect yourself legally, whether you've been thinking about living together or you've been living together for 20 years.

1. Agree on the payment of your expenses

Last year, the House of Lords ruled that a couple who had been living together for 20 years had to divide the profits from their property according to what they had originally put in. So, in case you separate at a later date, it's always wise for you to agree on the financial structure of your relationship.

If you have bought a property together, decide what you're each going to pay for and how. It may help to separate items into categories, such as:

  • General expenditure (e.g. food, petrol, bills that relate to the occupation of the property, etc.).
  • Mortgage and rent.
  • Bills that relate to the ownership of the property (e.g. council tax and buildings insurance).

You both may decide that it's only fair to split the costs of the general expenditure, but if one of you has a larger share of ownership in your property, you may consider it fairer to split the bills accordingly (e.g. 30:70 or 60:40 as appropriate).

2. Decide on how you will operate joint accounts or credit cards

When you're living together, work out how you will operate the bank accounts that will pay for your expenditure, as this can be crucial to the question of ownership of the property at the end of the day. If you plan to keep your own separate accounts, make it clear that those bills you pay will come from them. Where you plan to have a joint account, agree the amounts you will both contribute and be strict about the items that can be paid from it - if you don't and you buy large items from it, you could find that you have problems agreeing who is to have the item in the event of a split (and the law on this can be quite complex).

Be careful about credit cards! Nothing can start an argument like one person accusing another of overspending on a joint credit card. Don't go there. Either keep separate cards or if you decide to have a joint one, make sure it's only used for joint purchases and is paid for jointly (and if you do separate, that you agree in advance as to how you will divide these items up - most lawyers advise their clients to toss coins!)

3. Make a cohabitation agreement

Once you have sorted out all of the financial issues between you, make a cohabitation agreement. A cohabitation agreement stops you from arguing about these matters again and, should things get nasty at a later date and the dispute ends up in court, the cohabitation agreement is evidence of both your wishes.

Click here to protect yourself by making a cohabitation agreement now.

4. Be clear who owns the property


If you're buying a property together, you must be clear with each other how you are going to own it and what you will each contribute. For instance, if one of you puts down 70 per cent of the deposit, you may agree it's fair that they retain a 70 per cent interest in the property, but only if they then pay 70 per cent of the mortgage each month.

Whatever figures you agree, make sure that the ownership you want is recorded properly by your conveyancing solicitor, who purchases the property on your behalf as tenants in common. If they don't do this, then you will own the property as joint tenants, which means that it's owned in equal shares and if one of you dies, the share of the deceased will pass automatically to the surviving partner - not to the deceased's family or anyone else they may choose to nominate in their will

Also, ask your solicitor to draft a trust deed to reflect the agreement you have reached as to what should happen if you separate, since this will then make the terms of ownership absolutely binding upon you both and will cut out any arguments (and huge legal bills) if the unthinkable ever happens.

5. Prepare your wills together

If neither of you make a will, then you both will die 'intestate'. This means that your possessions, finances (and maybe your home) will be distributed according to law (the law of 'intestacy'), which is likely to be against your personal wishes. This usually means that your partner's property would be left to their next of kin (i.e. their parents or even their children), and not you.

Wills will reflect what you wish to happen to your assets when you die - they're not costly and it's easy to make a will. Not only do wills make things clear between the two of you, but also to your respective families - the worst legacy anyone can leave their loved ones is a dispute over their estate when they're gone.

You can find out more about how the laws on intestacy work here, or you can stop worrying and make a will today here.

Find out why the Law Society says cohabitants should make a will here.

6. Get a parental responsibility agreement

If you're a couple living together and have children who were born before 1 December 2003, then only the mother has automatic parental responsibility. This means that the mother has the right to make decisions regarding the welfare of the children (e.g. medical care and education) without having to consult the father.

This can cause difficulties if you're a father without parental responsibility and your ex decides to move out of the area, for example, or your partner dies and you have no rights over your children's welfare. If either of these events occurs, then the only way you can gain parental responsibility is by getting a court order or a parental responsibility agreement in your favour.
Therefore, it's wise to draw up a parental responsibility agreement if you have children; it can be obtained from your local County Court (or from the Court Service's website).

7. Prepare for future illness

If one of you gets ill, then it may be difficult for you to decide what happens to your loved one. By making a power of attorney, you can gain control of your partner's finances should they become mentally incapable.

You can find out more about making a power of attorney here, or you can stop worrying and make a power of attorney today here.

If there are certain medical treatments you don't want to receive if you get ill (e.g. whether you would like the life support machine to be turned off), it's also wise to draft up an Advance Medical Decision stating your wishes. This will help your partner to take care of your wishes, as the hospital may have a duty to consult your partner's next of kin, taking you out of the decision-making process.

State your medical wishes by making an advance medical decision today here.

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Published on: June 5, 2008

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