How to protect your finances if things don’t work out.

By: High50

In a year of cancelled weddings even more couples are cohabiting, but if things don’t work out, how do you protect your financial future?  Zoe Bailey, Financial Planner and Director at wealth management experts Tilney, says that ‘while divorce can be financially very damaging, so too can separation for unmarried, cohabiting couples. It’s a common misconception that people living together are protected by ‘common law’. In reality, you don’t have automatic rights and can end up in a desperate situation if your relationship ends. Unlike married couples, if you’ve moved into a property owned by your partner, you don’t have any rights to the property if you split up or if your partner dies, even if you are paying part of a mortgage.”  

These are the things Zoe suggests you to keep in mind when planning your financial future together:

Legal agreements: “While discussing legal documents might be a real passion killer, an increasing number of people are drawing up cohabitation agreements; a legally binding agreement that gives a couple who live together certain rights so that they can make a financial claim in the event of separation or death. This can provide certainty and take away much of the stress faced at what would be an already difficult time. Cohabitation agreements also make sure that you get back what you are entitled to after a separation, rather than just an unequal, and perhaps unfair, splitting of joint assets.”

Advice: “If you’re thinking of entering into a legally-binding agreement then it’s best to seek financial and legal advice, as well as for other protections like a will or powers of attorney. Nobody wants to think about the worst happening, but it can save you in the long run if you protect yourself now.”

Education: “To feel more secure financially, it is all about education. Try and find some time to research what you hold already, what type of policies, where are they, what are they currently valued at. Can you support yourself should something happen, could you keep the property should your relationship break down? Financial education is the key to financial security and independence.”

Zoe has given High50 specific advice for cohabiting couples over the age of 50.

Pensions: For cohabiting couples over 50, it’s worth thinking about how you can protect your pension which, for many, could be a more valuable asset than the family home. Only once married your pension could be affected by a divorce proceeding, so the first thing to note is that your polices are only yours when cohabiting. However, if you wish your partner to benefit from your pension policies before marriage, then very importantly you’ll need to ensure that your Nominations of Beneficiaries are up to date with your pension provider. If you don’t, then your cohabiting partner does not have an automatic right to benefit from your pension should the worst happen, and your money could end up in the wrong hands. Make sure to bear in mind which type of pension scheme you are a part of – if you’re over 50 then you may well hold an older, alternative pension scheme, like a Final Salary Scheme, which has a big impact on retirement and succession planning so needs more careful consideration.

Blended families: For cohabiting couples and blended families where you both have children from a previous marriage/relationship as well as your current one, you’ll need to plan for the distribution of your wealth, as you and your loved ones may not be protected as you had hoped in the event of separation or death. It can be confusing to know how to arrange your finances if there are multiple households involved. Speaking to a financial professional can help you get your finances in order and ensure that your wealth goes where you want it to.