Family and Divorce

Cohabitation Agreements and Deeds of Trust

As a result of the law not granting cohabitees any automatic protection, it is often the case that cohabitees explore how they can make provision for how their assets should be dealt with on separation.

At Rix & Kay we regularly draft and advise on Cohabitation Agreements and Deeds of Trust for clients who are cohabiting, wish to cohabit, or are simply purchasing a property with another person. The purpose of these documents is to set out the basis of your agreed cohabitation and property ownership.

Cohabitation Agreements

It is recommended that same-sex or different-sex partners who live together consider regulating the terms of their cohabitation by entering into a Cohabitation Agreement.

As with Nuptial Agreements for those in a marriage or civil partnership, a Cohabitation Agreement sets out how a cohabiting couple own their assets, and how their property and financial assets should be divided in the event of divorce, separation or death.

Parties would be advised to consider a Cohabitation Agreement in a number of circumstances, including but not limited to:

• Where there is a substantial difference between the financial position of the parties
• Where parties reside in a property owned by one of them
• Where there are jointly owned property or other assets
• Where family members have contributed financially
• Where there are children
• Where one has assets they want to protect
• Where one has a previous family they wish to ensure are financially protected
• Where the parties want a method to resolve the finances in the event of a separation.

There must be a full and frank exchange of financial information and it is important to attach a schedule of both parties’ financial positions to the agreement. Where there are children involved, consideration will need to be given as to how they will be provided for during the cohabitation and in the event of separation. It is also important that each person receives independent legal advice to ensure they fully understand the potential effects of the agreement.

If your circumstances change significantly, the agreement should be reviewed and we always recommend a review provision to deal with this. For example, upon the birth of any child, if either party becomes unable to work or if there is a substantial change in assets. This is to avoid the suggestion that the agreement fails to take all the relevant circumstances into consideration.

Deeds of Trust

Deeds of Trust (also called Declarations of Trust) are documents setting out what interest each party has in a property– for example how the sale proceeds should be divided or how much one should receive if the other buys them out. These documents can also include provisions relating to who has the right to remain in the property if a couple separates and cannot agree this issue.

It is highly recommended that all those who purchase a property together enter into Deed of Trust to avoid complex, lengthy and expensive arguments taking place in the event of a separation. Deeds of Trust are also highly recommended where a couple cohabits in a property held in the sole name of one of them, again to avoid a later dispute over what share of the property each are entitled to. It is essential that a Deed of Trust is entered into where there has been an unequal contribution to the purchase price, or if parties are not having equal shares in the property.

Not only does the document establish what shares a couple own in the event of their separation, it also applies in the event of the death of one of them.

Deeds of Trust are also commonly used by non-cohabitees who purchase a property together, or contribute financially to the cost of a property being purchased by another person. For example these documents can be used by family members or friends who jointly own a property, or where parents pay the deposit on behalf of their children.