When you begin living together as a couple, without being married, it is best practice to set up a trust deed to make clear your joint wishes and intentions concerning ownership of the house you live in. Preferably, this should be in association with a ‘living together agreement’ setting out your general intentions.
If you buy the house as a couple, in joint names, the trust deed can be very useful. Firstly, it should set out a brief history of the property, including when it was bought, how the purchase money was provided by both parties and some information about the mortgage. Next, it should describe how you want to own the property. If you want an individual's share to pass automatically, on their death, to the surviving partner, then the house should be owned as beneficial joint tenants. If you want to keep strict shares, then it should be held as tenants in common. It is possible to say whether the property is held in equal shares, which means that you both own half, or in any other proportion you wish to specify. The declaration as to the proportions can specify that this is by reference to the actual amount of money each party contributed to the purchase, or that the proportion you have agreed on is irrespective of the monies provided by each party in this or previous transactions relating to the property.
The deed can then make clear plans for future insurance, mortgage payments etc. and can specify any rules which the owners (now also referred to as trustees) have to abide by. For example, you might agree that any future mortgage obtained on the property must be with the consent of both parties. You can also include an option for one trustee to be given the chance to buy out the share of the other if the relationship breaks down.
If the house is in only one name, the deed is very similar but much more important to the person whose name does not, for whatever reason, appear on the title deeds. For example, this could be because he or she is still married to someone else. In this case, the trust deed makes it clear that the house is being held by one partner, in his or her sole name, but that he or she accepts that the other partner is entitled to a share of it and is holding that share in trust for the other partner. The deed can specify how the property is to be shared. It can give detailed instructions as to how the proceeds of sale should be divided, specifying for example that one partner is to be given credit for the money they contributed from the sale of a previous property or that one partner is entitled to 25%, even though they have not contributed anything to the property, because their income is to be used primarily to pay the mortgage instalments. Most importantly, the trust deed can record the agreed value of the property at the time of purchase, the amounts which it is agreed have been contributed by both parties and it can specify how any future increase in value is to be owned by the parties.
It is also important to make wills – the assumption that a 'common-law' spouse will inherit in the same way that a spouse or civil partner will is simply incorrect. If there is no will, the intestacy laws will apply unless a successful claim for financial relief as a dependant is made.
if you are considering marriage, a pre-nuptial agreement is often sensible, particularly where there is significant wealth to protect.