Cohabiting couples: Here’s how to protect your financial futures

Young couple sitting on sofa

If you and your partner are cohabiting or planning on moving in together, a cohabitation agreement can be critical to protecting your respective financial futures. While there have been notable legal advances in protecting the rights of those who choose to live together outside the tenets of marriage, some mechanisms are still being tested in the courts and, as such, a written agreement which sets out the financial consequences of your relationship can be particularly valuable. Let’s explore.

Drafting a cohabitation agreement

A well-drafted cohabitation agreement can be used to document arrangements in respect of finances, immoveable property, moveable property acquired during the course of your relationship, children, debts, pets, and your general financial responsibilities towards each other both during the relationship and should the relationship come to an end. At the outset, you may want to make it clear in the agreement that the intention is for you to be cohabiting life partners, and that you do not intend for there to be any community of property.

It is advisable that each of you make a complete inventory of your respective assets so that you have a record of who brought what assets into the common home, and this can be attached as an annexure to the agreement. You may want to specifically state that each partner retains ownership of any assets brought into the relationship, including any inheritances that may be received, and that each of you remain responsible for your own debt, including that incurred during the subsistence of the relationship.  It is also a good idea to agree upfront as to how all future financial record-keeping will be managed during the relationship so that you retain documented proof of your respective expenditure.

Immoveable property

Ownership of immoveable property is one of the most important matters that should be covered in your cohabitation agreement as failure to do so can leave couples with very little legal recourse should the relationship come to an end. Complexities may arise where the primary residence is owned by one partner while the other partner contributes towards bond repayments, renovations and general home maintenance. Should the relationship come to an end, the non-owner may feel as though she is entitled to a share of the property as a result of her ongoing financial contributions. However, in the absence of documented proof supported by a written agreement, she will have very little recourse. In such circumstances, a cohabitation agreement could specifically deal with the rights of the partner who does not own title in the property but who contributes towards the costs of the property. For instance, the couple may agree that, if the relationship comes to an end, the contributing partner will be paid out a lump sum equivalent to the amount that she has contributed during the relationship, adjusted for inflation. If the relationship comes to a sudden end, keep in mind that the partner who owns the property has the right to evict the other partner immediately, so it may be a good idea to build a clause into the cohabitation agreement allowing that partner a specified period in which to find alternate accommodation.

Money management

During the course of your relationship, you will naturally acquire goods such as furniture, appliances, art, jewellery and household effects, and it’s important that your cohabitation agreement deals with the ownership of such items. When a long-term relationship comes to an end, it is often difficult to remember who bought what, which is why record-keeping plays such an important role. Your agreement should also set out what will happen to jointly-owned assets in the event of a break-up. If both partners are earning an income, be sure to set out in the agreement how your living expenses will be apportioned, who will be responsible for which expenses, how the daily money management will operate, and how the respective bank accounts will be set up.

Protecting the stay-at-home spouse

Where one partner is a stay-at-home parent, careful provision should be made to protect their financial interests. Without an income, a stay-at-home parent has no way to invest and create her own wealth, and this can leave them in a vulnerable position in the event of a break-up. If the consensus is that one partner will stay at home to raise children while the other partner generates income, then ideally your cohabitation should deal with how the working partner’s invested assets should be split in the event of a break-up. What is important to keep in mind that a cohabiting partner does not have a claim to a share of the other partner’s pension interest as this right is afforded to legally married couples only. As such, a cohabitation agreement that promises a share of a pension interest will not be enforceable against a pension fund.

No duty of support

Living together as life partners confers no legal status on cohabiting couples and there is no duty of support between such partners. This means that, if the relationship terminates, the economically weaker partner has no legal right to claim maintenance as this right is only afforded to legally married couples in terms of the Maintenance of Surviving Spouses Act. As a result, especially in the case where one partner is a stay-at-home parent, provision for maintenance should be agreed to in the cohabitation contract. Keep in mind, however, that the agreement to pay maintenance will tie the partners to each other after they have split, and it may be better to agree to a lump sum payment instead.

Child maintenance and support

It is important to remember that parent’s obligation to provide maintenance to their children is a legal duty regardless of one’s marital status. If your relationship comes to an end, both parents are obliged to provide for the maintenance of their children, so this does not need to be dealt with in the cohabitation agreement. If you have pets, it is also a good idea to document what will happen to them should the relationship come to an end, and how the ongoing costs of vet care and pet insurance will be covered.

Covering all eventualities

While a cohabitation agreement is designed to set out the financial consequences should the relationship break-up, it should also deal with other eventualities such as the death of a partner, disability or illness, unemployment, job relocation, and inheritance, to name just a few possibilities. If your intention is to provide for each other should one of you pass away, then your cohabitation can cover your agreement for each partner to hold life cover sufficient for these purposes. If one partner is rendered unable to work as a result of disability or chronic illness, the financial burden will fall on the other partner, and it may be advisable for this eventuality to be dealt with in the agreement, and to ensure that each partner takes out sufficient income protection or capital disability cover to protect against such risk.

If you and your partner are already living together, it is not too late to draft a cohabitation agreement. As and when your personal circumstances change, it is advisable to review and revise the agreement to ensure that it remains appropriate for your needs. The ultimate aim of such an agreement is to ensure that, in the event that the relationship terminates, litigation is avoided, and that each partner has a clear understanding of their rights.

Have a great day.


Leave a Reply

Let's talk

For a free consultation with no obligations, please fill in your details and we will contact you to set up a meeting.