Many couples now choose to live together before getting married (if they choose to get married at all). Therefore, it’s important to ensure that you have the right documentation drawn up in order to protect property interests.
Why Get a Declaration of Trust or Cohabitation Agreement?
Cohabitation Agreement and Declaration of Trusts are both legal documents for cohabitating couples, but they serve different purposes. There is a common misconception that couples living together form a ‘common law marriage’ affording them the same protections and legal rights as those who are married or in civil partnerships, but this is not the case.
Cohabitation Agreements
Cohabitation Agreements are for couples who live together without planning on marrying or entering a civil partnership. This can be used to establish how property, as well as other assets, will be divided if a couple separates.
It can also set out how bills are to be paid while living together, who is responsible for paying household outgoings, and other financial matters that the couple might need to consider in the event of a break-up.
This tends to make them more comprehensive than declarations of trust, as they help to establish how various things will be dealt with should there be a separation.
Declaration of Trust
This states how the proceeds of a sale of a property will be divided out between two parties should it be sold. This means that if you ever sell your property, you know how much money you will receive, as you have not left how the property is owned up for assumption.
As well as being used by cohabiting couples, Declarations of Trust are also commonly used by people who wish to purchase a property together without living together (such as for an investment) or contribute financially to the cost of a property being purchased by someone else (such as a parent contributing towards the deposit of their child’s house).
While a Declaration of Trust is recommended, it only covers the ownership of property and not the other financial arrangements that Cohabitation Agreements cover.
Are they Legally Binding?
As long as they are properly executed, Declarations of Trust are legally binding. Cohabitation Agreements are a bit more complicated. They are generally enforceable but only provided they are drafted and executed properly and have been signed as a deed, with both parties receiving independent legal advice. Make sure to seek independent legal advice before