Am I financially liable for my live-in partner?

Q How does the law operate concerning cohabitation and financial liability? My partner has a number of businesses, and we have now lived together for over a year. Does my property (including a house and car) become his (in terms of an unlimited liability) should a company fail? How does this situation alter should we decide to marry?

RV

A As you will see from my column this month, cohabiting can be a legal minefield. If you do not put your arrangements in writing you can end up with problems if you separate or if one of you predeceases the other.

Your partner's businesses won't ordinarily have a claim on your house or car if they are both in your name, but he may gain a beneficial interest in your home if a trust is declared based on contributions to the mortgage. Business creditors may have a claim on this but the chances are extremely slight since trusts are difficult to prove. If you are concerned you should see a solicitor and get a cohabitation agreement drawn up since this will protect you.

If your partner's businesses are limited companies they will not have a claim on you or your partner's private property. Limited liability means business losses are limited to assets that belong to the company. If the company makes a loss, your own assets such as your house and car are protected. In some circumstances it is possible to get a guarantee for a company loan secured on a house. However, if your partner did this you would have to be informed and give your consent before it could happen.

Most of the above applies if you are married, so as long as the house is in your name you should be secure - but if you decide, say, to put the house in joint names, it may have to be sold to pay off creditors if your partner goes bankrupt. And as a spouse, your income would be taken into account on bankruptcy, when calculating how much of your husband's income is available to pay creditors.