Five things to think about before you make love

If you're in a loving relationship, take these steps now to make sure you don't get stabbed in the back...

I was sitting peacefully in the kitchen when my girlfriend said it was time to discuss my death. Since she was holding a sharp knife at the time, the question made me nervous.

I become even more nervous when I realised she was talking about money. “Who would get the house? What about your pension? Where have you hidden the paperwork?”

Dying turned out to be relatively pain-free. Since we have two children, she should get it all. I’ve got an old will stuffed in a drawer somewhere, broadly stating that.

The big question is what would happen if we broke up. We’re just one of millions of cohabiting couples, and our legal rights are limited. If you are living in sin, as people used to call it, your finances could burn in hell if you break up.

Knife begins at 40

First, let’s clear up one misconception. There is no such thing as a common law wife or husband. The act of living with somebody confers no legal rights at all, and having children doesn’t help much either.

A couple of years ago, the Law Commission proposed changing that. It suggested that unmarried couples who lived together for two years should be entitled to half of their partner’s estate if they died without leaving a will. After five years, they would enjoy the same legal rights as married couples.

A great idea? More like a legal nightmare. How do you define cohabiting? Should the law intrude on informal live-in relationships? Should you have a financial responsibility for your ex?

If you want full legal rights, wouldn’t it be wiser just to get married?

The government has enough on its plate without tackling these questions, and has just decided against giving unmarried couples equal rights to married couples. When I explained this to my girlfriend, the knife twitched in her hands.

When love breaks down

Breaking up is hard to do, and it's also heartbreakingly expensive. Splitting with one partner and start a new life can cost around £20,000. Couples don’t like to think about the consequences when they are young and in love, which only worsens the fallout when they are old and bitter. But it pays to be realistic and plan your finances while you are still on speaking terms.

Better legally wed than casually bedded

If you are married, you have a safety net. The courts aim to split your assets equally, depending on how long you have been together and whether you have children. If you break up after a couple of years, you have less rights to your partner’s dosh than if you were married for 25 years and have children. The wife typically retains custody of the kids, and keeps the family home. The husband may retain a financial interest in the property, which he can claim when the children leave.

The woman may also have a claim on her husband's pension and other savings, at the discretion of the judge. Blame is irrelevant when carving up the family assets, even in cases of adultery.

These laws also cover registered civil same-sex partnerships, but not cohabitees. When love breaks down, you will be left to your own devices. If you have kids, you could end up chasing a feckless ex through the Child Support Agency.

If you’re one of the four million unmarried couples living together, here are five things you should think about before you next make love to your partner. Women should pay particular attention.

1. Cohabiting is dangerous.

Living with your lover could be the biggest financial mistake you ever make, especially if you’re a woman. You could live with a man for 25 years and give up work to raise children, but if he runs off with his secretary or your sister, you are entitled to absolutely nothing. How scary is that?

2. Get your name on it

You are entitled to a share of any assets in joint names. If buying a house together, get your name on the mortgage and take out the property as "tenants-in-common", rather than joint tenants. This gives you a clear stake in the property (it doesn’t have to be 50:50, you could adjust it to reflect the size of the deposit each of you putting), which you can claim if you split up. It also allows you to bequeath your stake to anybody you like. If you are joint tenants, your partner automatically scoops the lot if you die, so you cannot leave your share to someone else.

3. Build your own savings

Too many women rely on a pension in their partner’s name. That’s disastrous if you break up. Your live-in partner may concede a half share of his property, but get very touchy about his pension.

If you can, build your own savings pot. Use your tax-free Isa allowance, everybody has one.

Both of you should try to keep some financial independence, for example, by maintaining separate bank accounts to one partner can't run off with all your cash. You can always run a joint account to pay the bills. You could even set up an "escape fund", to give you a flying start to setting up your new life.

4. You’re on your own

Even after you have broken up, the financial ties remain. If your partner starts running up debts, their credit history may be held against you. Remember to cancel joint credit and debit cards, and change your online banking passwords. If you want to take out a mortgage or loan in your own name, remember that you will no longer be judged on your joint salary income, so can only borrow smaller amounts. If you give or receive maintenance, this will be included in your lender's affordability calculations.

5. Protect yourself

Live-in couples can have even more rights than married couples, according to the Law Society, but only if they sign a cohabitation agreement. Ironically, while pre-nuptial agreements aren’t legally binding, cohabitation agreements are recognised by the courts in England and Wales. Provided they are structured by a solicitor, they can give you more protection against death or separation than marriage.

Mr and Mrs Wrong

Love doesn’t always last forever, so try to tackle these issues before Mr or Miss Right turn out to be that lousy no-good ex who broke your heart and trashed your finances. Just make sure the kitchen knives are safely tucked away.

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