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Are you financially worse off after divorce or break up if you never tied the knot?

Many people don’t realise this, but common law marriage doesn’t exist, and the financial implications of breakup during a recession can be very different depending on whether or not you have legally tied the knot.

A survey by Starting Over Show (SOS) reveals that over 86% of the participants personally know someone going through a relationship break up or divorce during the last two years, and SOS believes that statistic is likely to increase due to the financial pressures of the current recession.

In another survey by the same organisation in the Autumn of 2008, 46.7% thought that common law marriage exists. But family lawyers Mayo Wynne Baxter have to explain the sad truth to some of their clients who are not married, that the law treats `living together’ couples who are breaking up very differently from married ones. “They ask me what they are entitled to,” says Linda Lamb, one of the senior partners at the Brighton family law firm, “and I have to tell them that if they have not acquired an interest in the property of their partner or if there are no children of the relationship where there could be a claim for the children, they are entitled to nothing.”

The Government-backed `Living Together Campaign’ is trying to raise awareness of the problem, and information on the legal position of unmarried couples can be seen on the Advice Now website.
Many breakups are made worse by couples being in debt, something which Fiona Monson of Armida Business Recovery LLP, helps them to resolve. But Fiona’s experience of the financial implications of not being married are perhaps surprising, due to the lack of legal protection in law for unmarried couples:

“Surprisingly I can’t think of many insolvency cases where non-married ‘spouses’ have been worse off due to divorce.  This may be because the spouse or ex-spouse is treated pretty badly in bankruptcy whereas a ‘common law spouse’ is not an associate of the bankrupt so is less likely to be pursued as the onus of proof shifts to the trustee and cannot be pursued for as long.”

So it seems that if your ex-partner is going bankrupt you may be better off for not having married them – but if there is still money in the pot, then a partner who has stayed home to bring up the kids is at a serious disadvantage.

With the massive increase in redundancies and the deepening of the recession, financial pressures can not only act as a catalyst for divorce and break up, but also make those break ups even more traumatic.

“I certainly have stories of debt causing or worsening splits” Fiona tells us. “I did an individual voluntary arrangement for a lady who desperately wanted to keep her financial situation secret from her husband.  Inevitably he found out and they divorced.  I also had a bankrupt whose estranged wife owned property before they were married but put it into joint names so I was able to claim it was half his – and she had to pay £25,000 – not nice but the legal position gave me no choice but to pursue it.  I did have one case where the couple weren’t married and out of guilt (I think he was seeing someone else) the bankrupt let her keep all the proceeds from the sale of the house which he had no legal right to do under the circumstances. I had a horrible meeting throughout which she sobbed as she realised that his bankruptcy did not allow her to receive any funds, as a non-married couple and with her name not on the deeds, all the money had to go to his creditors. Sometimes it’s really tough doing this job but, luckily, most of the time I get to help people resolve their financial dilemmas and start over again.”

There is a lot of complication surrounding ownership of the matrimonial home which gets particularly messy when divorce and bankruptcy coincide.  There has been a lot of case law on this, but a case in December 2007 awarded the house back to the wife having had the divorce settlement set aside.  The main point is there is little clarity on this and people are likely to incur huge costs defending their corner.

The advice from family lawyers like Linda Lamb is that if you are not planning on getting married, then have a contract drawn up with independent legal advice agreeing the financial split should the relationship end, and be aware of the possible implications if either of you go bankrupt, whether married or not.
Interesting Facts:

Family Lawyers can draw up `living together’ contracts, but so can some independent wills/trusts specialists.  If you get divorced, you may want to update your will (unless you want to leave everything to your ex!)

A study has shown that January 8th is the busiest day of the year for divorce lawyers when up to 1 in 5 couples will enquire about divorce after the pressures of Christmas.  The enforced intimacy of Christmas, coupled with the start of a new year, is thought to be the main trigger.
Reported in the Daily Telegraph 8 January 2007

Results of survey can be viewed here:

Suzy Miller has also created an independent, non-commercial online resource hub – the SOS Village which allows people to access a range of resources and to share personal stories to help them through a break up.

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