Cohabitants couples fall into many varieties of categories, ranging from young couples living together before or as an alternative of being a married couple where one or both may not be willing to enter into marriage due to previous divorce or age.
With a rising number of couples cohabiting rather than marrying, the incidents of long-standing, non-married couples breaking up are on the increase. And unless careful consideration was given at the outset the consequences in relation to their respective assets can be disastrous.
As lawyers advising on such matters over many years we are often asked what will happen to property owned by each of the partners should the relationship break down and how the cohabiting couple’s finances should be handled. They worry if they “move” their partner into their property the partner will then have a “claim” on the property or other assets even if they are not married. Under the recently enacted Civil Partnership and Certain Rights and Obligations of Cohabitants Act, 2010 qualified cohabitants will now have certain rights to property and financial reliefs. The Courts will, however, consider various other factors.
It is becoming increasingly common for couples in this position to have a Cohabitants Agreement drawn up. This provides the framework for couples to record their intentions and record their respective contributions to the relationship. This, in turn, allows cohabitants to opt-out of any rights and their obligations provided for in legislation. Provided the Cohabitants Agreement is deemed valid cohabitants can feel safe in the knowledge that if the relationship was to break down, then the agreement will safeguard them financially.
Some Tips for managing cohabiting couples finances
Consider “Three-Pot” System
It is possible to have financial independence even in case if you are one-half of the unmarried or cohabiting couple. One option is the “three-pot” system. It means having 2 individual accounts and one joint account; this tactic is helpful in avoiding any unnecessary power struggle, or tension between cohabiting couple’s finances. After deciding how much the proportion of shared expenses, e.g., household bills – you can keep remaining income as personal saving.
In a cohabiting couple, both partners must be mature enough to manage their personal expenses along with playing their part for the household expenses. This strategy of “three-pot” also permits one partner to “treat” the other partner without any further drama. Household sharing comes with a commitment to the management of money. Your finances must not become a source of troubles, and cohabiting couples should be fair regarding their financial expectations and habits.
Divide all Bills By Income
Dividing all expenses and bills equally is the best option if both partners have the same amount of income. But if there exist considerable differences in the income levels, then there are possibilities of bruised egos or resentment. Here, the key is understanding one another and giving emotional support. Neither partner ought to feel insulted for having a no-pay internship, low-paying job, losing a job, or experiencing disparities of income – as all these are beyond the control of an individual. One of the best solutions is to divide bills in proportion to income for fulfilling the cohabiting couple’s finances. All this can be managed easily through spreadsheet software as it assists in managing the household expenses more fairly.
Take the following example: After paying taxes, one partner is bringing 40% of his combined household income, and another partner is delivering 60%. So, both of them should divide the expenses in proportion to their income levels. This particular strategy will also help in lowering the pressure on a partner who has less income as they can set some goals such as saving for retirement and emergency fund.
Take Turns Managing the Finances
Managing accounts and paying all bills should be the mutual responsibility that leaves the couple feeling accountable, involved, and empowered. If one individual from the couple is more organized or does every task with enjoyment, there might be a temptation to assign the role of paying bills as a sole responsibility. However, the issue with this is, if some emergency happens to that responsible partner, the other may face trouble with how to access shared financial information and bills.
For balancing this situation, try to switch this role periodically – this incorporates becoming acquainted with all stages of the process from signing in on management software to allocating funds. Take turns on paying the bills and handling the account every 3 to 6 months. In this way, if one partner faces sickness, unexpected breakup, or any other emergency, then another partner can starts from there right away with causing much disruption with personal finances.
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If you still lack answers you could check out this well-written and very informative guide on how to merge finances after marriage.