Cohabiting and splitting up... what it means for your money

The financial implications of divorce are well known, but what happens if you never got married?

When we start relationships, the last thing on our minds is how to deal with finances if we split up.

Perhaps we should be a little more pragmatic. According to the Office for National Statistics, 42% of UK marriages end in divorce. We all hope we’ll fall into the lucky 58%, but there are no guarantees.

So what are your financial options when ending a relationship? And what if you’re not even married in the first place?

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The legal status of the unmarried

From a legal perspective, unmarried couples who live together are termed as “cohabitating”.

The idea of “common law spouses” may have entered the vernacular, but such relationships don’t actually have a legally definable status and these couples tend to have fewer rights than those who are married.

Applying for benefits

If you’ve lived with a partner who was the principal wage-earner, you may need to apply for state benefits if he or she leaves.

Rowena (50, not her real name) from Manchester, has recently asked her live-in partner of 17 years with whom she has two children to leave their family home.

“My ex just keep keeps hiding his earnings,” she says. “If I report him for child maintenance, it looks like he has no money at all. I know he makes a decent amount, but he's self-employed so I can’t really prove it and I don’t have access to his accounts.”

Rowena has applied for Universal Credit, but because this benefit is paid in monthly arrears, will need to wait at least five weeks for her first payment.

“He has left me without any money and ignores all my calls. I’ve needed to borrow from my family. It’s a really embarrassing position to be in. I never thought this would happen to me when we got together.”

So, what are your options while you’re waiting for your benefits to be sorted?

Firstly, make sure you have savings. This is easier said than done, but it’s wise to have the equivalent of three months’ salary in savings in the event of a financial emergency.

Secondly, consider benefit advance payments: while your benefit claim is assessed, you can apply for a loan, which you’ll need to repay within 12 months.

Children

Unmarried fathers don’t automatically have parental responsibility for their children, unless they have registered the birth with the mother, marry the mother, become a legal guardian or have a parental responsibility order.

One of the first steps, when a couple separates, is to decide which parent the children will live with and how frequently the other parent will see those children.

If you can informally arrange financial support with your ex-partner, this is known as a “family-based child arrangement”.

If you can’t come to an agreement, the Child Maintenance Service can help agree the amount you each need to pay, which can be reviewed on a yearly basis.

If your ex refuses to contribute, the Child Maintenance Service can contact him or her to find the reasons for the non-payment and has a number of options.

These include garnishing their earnings or state benefits; taking money from their bank or building society savings or taking them to court.

Cohabitation agreement

When you move in with a partner, it’s worth ensuring you’re aware of your legal obligations.

If you’re not married, a cohabitation agreement can include information such as: how your assets will be divided if you separate; Ownership of shared property; arrangements if either partner passes away and joint responsibility for debts.

Although there is ambiguity around the legal status of such agreements, Rowena wishes she had the effort at the beginning of the relationship.

“Everything is so vague. He’s refusing to pay and it feels like there’s nothing I can do”.

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Pensions

The end of a relationship can be distressing for both men and women.

But, when it comes to pensions, there’s ample evidence to suggest women are often on the losing side.

According to research from Age UK, divorced women potentially miss out in retirement as a husband's private pension is rarely mentioned in divorce proceedings.

According to the research, 40% of women between 55 and 70 depend heavily on their partner's income for a decent retirement as they haven’t built up their own pension pots.

The research also found 70% of couples never discuss their pension before separation.

Age UK’s charity director, Caroline Abrahams, says: “The money many divorced women are currently going without could make the difference between having to count the pennies or being comfortably off in retirement, so this has huge implications for them.

“It is crucial that women are helped to build up a decent private pension, get the right information and advice at the right time.”

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Legal advice

Cohabitating couples often decide not to consult a solicitor on separation to avoid legal costs.

If, however, your former partner refuses to listen to your attempts to make a financial arrangement or is failing to honour the terms of your cohabitation agreement, court action may be your only option.

To find a solicitor in England or Wales, check out the Law Society or Resolution.

Before involving the courts, you could consider mediation, in which an impartial third party can help you and your partner resolve any joint financial concerns. Additionally, you can consult The Money Advice Service, Relate and Citizens Advice.

Same-sex couples

If you’re in a civil partnership or same-sex relationship, the same criteria should be applied at the end of a relationship as would be with heterosexual couples.

As with any couple, the court’s first priority will be the welfare of any children under 18.

To apply for a dissolution or a divorce, you’ll need to have been with your partner for at least one year.

To learn more about the dissolution of same-sex relationships, see the Stonewall website.

Civil partnerships for heterosexual couples

Finally, it's worth noting that the Government will introduce civil partnerships to heterosexual couples, as well as homosexual couples.

Civil partnerships provide exactly the same above-mentioned protections as marriage, without the label.

Equalities Minister Penny Mordaunt promised that the change in the law would happen "as swiftly as possible".

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