News & Insights

The Essentials of Relationship Planning

Ensuring you are protected in the event of a potential relationship breakdown.

Discussing with your partner what should happen, should your relationship breakdown, is often an uncomfortable conversation. Due to this such issues are rarely discussed, and this often means a dispute occurs at the end of the relationship as to who is entitled to what.

In order to avoid this, a number of steps can be taken to provide you and your partner with certainty in the event you separate, saving the stress and potential legal costs if a dispute later arises. Planning for a relationship breakdown should therefore be considered a sensible piece of financial planning, much like preparing a Will.

A few options available to you and your partner are set out below:

Declaration of Trust

If you are to purchase a property with your partner, or presently own a property, you may wish to consider a Declaration of Trust. A Declaration of Trust is a document that formally sets out what should happen in the event of a sale and, if the property is rented, how the income from the property will be shared.

Declarations of Trust are common where there have been unequal contributions to the purchase price or if there are going to be unequal contributions to the mortgage going forward, or if one person has made improvements to the property and want this to be recognised. Where a property is in joint names, in the absence of a Declaration of Trust, the presumption is that the parties own the property equally.

A Declaration of Trust may also be used where a property is in one person’s sole name, however it is agreed for the other person to have a share in the property and therefore they use a Declaration of Trust to set out their respective shares.

In the case of unmarried couples, Declarations of Trust are binding documents, and there are only limited grounds for disputing them (such as fraud, misrepresentation, duress and illegality). Declarations of Trust sometimes are prepared alongside a Cohabitation Agreement, which is explored below.

Cohabitation Agreement

A Cohabitation Agreement is used to regulate financial affairs during a relationship and what should happen on a separation. A Cohabitation Agreement usually covers a wider scope than a Declaration of Trust, as it will generally look at both parties’ financial positions as a whole.  A Cohabitation Agreement is commonly used where one person owns a property and it is agreed that the other person will not have an interest in it.

Pre-Post/Nuptial Agreements

If you and your partner are planning to marry, consideration should be given as to whether you should enter into a pre-nuptial agreement. Pre-nuptial agreements can be used for a variety of reasons but are particularly common where one or both parties wish to protect assets built up prior to their marriage.

Whilst pre-nuptial agreements are not strictly binding, there is case law to say that where a pre-nuptial agreement is freely entered into, with a full appreciation of its implications and provided it is fair, then it should be upheld. This means that such agreements are holding more weight than ever before.

To give the best chance of the pre-nuptial agreement being upheld, there should be financial disclosure between you and your fiancé and it should be entered into no later than 28 days before the marriage. For this reason, it is recommended that a pre-nuptial agreement should be considered several months before the marriage.

Should you already be married, you can look at entering into a post-nuptial agreement, which has the same legal effect as a pre-nuptial agreement.

If you wish to obtain further advice as to the options available to you and your partner, please contact the head of our family team, Sue Baker, on 0118 951 6302, who will be pleased to discuss your matter with you.