Understanding financial and legal implications for cohabiting couples

Valentine’s Day is a few days away and many couples are contemplating the next step, with cohabitation becoming a common choice before committing to a marriage.

While love may be the main motivator, couples must understand the financial and legal implications.

Shaka Zwane, head of Insurance and Fiduciary, at Standard Bank said: "Without a cohabitation agreement, your partner is not legally protected."

Here are the financial and legal considerations for unmarried couples living together.

Navigating possible future breakups

Unmarried couples living together do not have the legal protections that married couples do.

If there is no cohabitation agreement in place then there is no clear recourse if the relationship ends. 

Therefore, couples should have a clear agreement that outlines the responsibilities of each partner, making the division of assets easier while avoiding costly legal battles.

Co-owning assets

According to Zwane, many cohabiting couples decide to buy a home together, but without a formal agreement, these shared assets are vulnerable in the event of separation or death.

In such cases, family members of each partner may try to claim these assets which could leave the surviving or separating partner without their rightful share.

A cohabitation agreement clearly outlines ownership and sets out a process for the divvying up of assets, giving protection to both parties.

Implications in case of death

Family disputes over shared assets are common when someone dies.

However, the stakes are even higher for cohabiting couples as proving ownership becomes difficult when there are no legal agreements in place.

Zwane said: "Unlike married couples, you are not automatically protected by laws like the Maintenance of Surviving Spouse Act. Another important factor is that without a will, it becomes difficult to claim tax benefits and estate deductions, which could inflate estate winding costs." 

While recent case law has offered some relief, the surviving partner must still prove that the relationship was permanent and that they need financial support, according to Zwane.

Estate planning

Comprehensive estate planning is essential for all couples, no matter their marital status and a valid will ensures that their wishes regarding asset distribution are respected.

"Life insurance and funeral cover, with your partner as the beneficiary, can provide crucial financial support during a difficult time, covering interim expenses and maintenance," Zwane said.

A professionally drafted cohabitation agreement, integrated with an up-to-date will and estate plan, clarifies the status of unmarried couples and strengthens each partner's position in the event of unforeseen circumstances. 

Zwane recommends consulting with a legal and financial advisor to help couples tailor these strategies to their specific circumstances.

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