Living and loving as a couple can be a costly experience

That Valentine sweetheart can turn sour when you live together, says Gaynor Pengelly. So make sure you will not pay a price

Valentine's Day couples who drift into a live-in relationship without discussing what the relationship means to each other first, could be setting themselves up for financial disaster. The hearts and flowers of the honeymoon period can be short-ived when bills start to mount and arguments spill out over who pays for what.

Valentine's Day couples who drift into a live-in relationship without discussing what the relationship means to each other first, could be setting themselves up for financial disaster. The hearts and flowers of the honeymoon period can be short-ived when bills start to mount and arguments spill out over who pays for what.

Establishing you are both on the same financial wave-length before setting up home together is vital. If one of you is a penny pincher and the other a spendthrift, merging finances could be a recipe for disaster.

"The basis of any good relationship is trust and communication," the independent financial adviser Kerry Nelson says. "Talk frankly about your respective income and expenditure. Make a list of joint expenses, such as rent or mortgage, utility bills and food and decide how you are going to divide the bills, particularly if one of you is earning more than the other."

Setting up a joint bank account and deciding how much you are going to put into the pot each month will help to avoid arguments. James Pirrie, of the London-based Family Law Partnership, advises couples to draw up a cohabitation agreement with lawyers before setting up home together. He says: "It might not be the most romantic of gestures but it will force couples to see their relationship in a more realistic light and decide how assets will be divided if you separate." The number of people choosing to get married is dwindling. Last year fewer than 300,000 people did and two thirds of the population agree that living together outside marriage is an acceptable option.

But while "living in sin" is fast becoming the modern marriage, the law protecting couples outside marriage remains in the Dark Ages.

Last November, at the State Opening of Parliament, the Queen made her historic announcement on civil partnership rights. The Bill will be a major step toward scrapping gay and lesbian discrimination by creating a legally recognised relationship, similar to marriage, with rights and responsibilities for those who register.

Although The Solicitors' Family Law Association welcomes this proposal it is pressing for further reform and a law to protect cohabiting couples who have lived together for two or more years or where children are involved.

"An increasing number of heterosexual couples are choosing to live together outside marriage and the law desperately needs to catch up," Jane Craig, chair of the SFLA, says. "Many of these couples wrongly believe they have a common-law marriage and their reliance on this misconception makes them extremely vulnerable when the relationship ends. The major problem is the lack of a family- law framework to help the growing number of couples who, for whatever reason, do not get married.

"A social attitudes survey found 56 per cent of people wrongly believe cohabiting couples have the same legal rights as married couples. They don't and they are left at the mercy of property law, which is inadequate to deal with these family situations. A general partnership registration scheme is not the solution because marriage is available to those wishing to formalise their relationship. Urgent reform is needed to the law on cohabitation to meet the needs of unmarried people."

Seeking legal advice is key when it comes to moving in together, especially if one partner owns a business and property in their sole name. The other should know their partner could take out loans to support the business against the security of their home. In extreme cases, this could render the couple homeless. The Family Law Partnership advises couples in business to draw up a cohabitation agreement to regulate this situation. If your partner asks you to move in, you should ensure you are getting back what you are giving up. For example, if one partner has been in a council property, they will be giving up security of tenure as well as any right to buy. If you will be contributing to the mortgage, establish what interest you will have in the property.

James Pirrie says: "Be cautious if you do not pay anything towards the mortgage because it would be difficult to prove to a court that you are entitled to an interest in a home you didn't put money towards. And if you invite your partner to move in and they pay for an extension, they will automatically acquire an interest in the property."

Anyone considering moving in with a partner who has children should take legal advice from a family law specialist first. If one party has children to support, they are going to have less disposable income in their new relationship.

If a professional man moves into a home with a non-earning divorced woman, her maintenance may be suspended. If she is paying for the support of her former husband, he could apply for the maintenance to be increased. She now has a second source of income for the joint household which could free more of her income to pay in his support, and vice versa. Cohabiting couples should also consider the possibilities of first-income loss through illness and death.

Disputes between a grieving partner and "the common-law in-laws" who never thought the partner was good enough are among the nastiest and saddest and can eat away money needed for financial security.

But with careful planning and good communication these arguments can be avoided by taking out protective insurance policies and making a will. Insurance policies such as Critical Illness and Permanent Health will ensure dependents will not be left destitute if you die or suffer financially if you cannot work because of ill health.

The basic products on the market are: Life insurance, which usually pays out a lump sum if you die while the policy is running; critical illness cover, which pays a lump sum if you suffer a life-threatening illness, such as cancer, a heart attack or a stroke; and permanent health insurance, which pays a replacement income if you cannot work because of ill health.

Mortgage payment protection (accident, sickness and unemployment cover) is often sold with mortgages. It will pay your bills for a year if you lose your job or are unable to work after an accident.

"Look at who would be affected financially if you can't work because of an illness or accident, or if you die," Michael Edwards, of Leeds-based Towry Law, says. "Then think about the risk you want to cover, taking into account that you are seven times as likely to suffer a critical illness before age 65 than to die.

"Permanent health insurance is particularly important for cohabiting couples, unlike accident, sickness and unemployment which covers you only for 52 weeks, PHI provides a replacement income and will pay out until you go back to work, or usually until age 65 if you can't go back."

'After he left, I had mountain of debt'

Sarah Allsop, from West London, knows only too well the impact of a failed relationship. Sarah, a 26-year-old PR executive, moved into rented accommodation with her boyfriend last year to test the waters before marriage.

"Paul proposed while we were on holiday in Australia and we truly felt we would spend the rest of our lives together," Sarah says. "He was all for getting a mortgage together and buying a house. But I felt I was little young to be tied down financially so we rented a flat in London."

The couple quickly discovered that when it came to handling their finances there was little common ground.

"I liked going out to restaurants and clubs but Paul wanted to save for a deposit on a mortgage; it ended in lots of arguments."

Heart-broken, Paul eventually packed his bags and moved back to Australia, leaving Sarah with a mountain of debt.

Says Sarah: "We had both registered our names on the tenancy agreement, so it came as a big shock that when Paul defaulted on his payment and I was held liable for his share," Sarah says. "The tenancy had a further six months to run and the agency would not allow me to terminate the agreement.

I also found myself responsible for all the outstanding utilities and a very expensive telephone bill, run up by Paul before he left the country.

Sarah says the financial implications of setting up home together simply did not occur to her. "We moved in together without a care in the world but it was a very different story at the end.

"I am only grateful that we chose to rent a place together first. Extracting ourselves from a marriage and mortgage would have been costlier and far more difficult."

'It's worked out brilliantly'

Financial advice was a priority for Ryan Mustoe and Cora Hayes when they moved into together last November.

The couple, from Chapel Allerton in Leeds, realised that redundancy, illness and accident would mean walking the tightrope financially.

"We are first-time buyers with little disposable income so we felt it was important to put safeguards in place to prepare for the worst," Mr Mustoe, a 27-year-old technician, says.

The couple were quick to sign up for life cover and permanent health insurance, so if one of the dies or suffers ill health and cannot work, the other will not be left destitute.

"We wanted to test the waters before making the commitment to buy a house together," Mr Mustoe adds. He moved to Yorkshire four years ago to be closer to Ms Hayes, a 27-year-old graphic designer.

The couple saved for the deposit on their new home by living at Cora's parents house for eight months.

Mr Mustoe adds: "Living together worked out brilliantly, and we managed to save £800 a month which gave us a helping hand on to the property ladder."

FACT FILE - CO-HABITING

Couples often set off unprepared for a life together. When they marry, they sign a complex financial contract imposed by law. It covers marriage, death and separation.

But when a couple begins to cohabit, there is no equivalent scheme unless they make an agreement in writing.

Whether cohabitation holds legal risks for you depends on circumstances. The Family Law Partnership urges couples to ask each other several questions before moving in together:

* Will you be able to meet the outgoings? Has your partner the same priorities as you and will they contribute towards your joint liabilities?

* What would happen if one of you was out of work through redundancy or long-term sickness? Should you be saving or paying for insurance against these risks? if so which risks?

* If you separated, there may be conflict about who will retain what. Probably, you each retain what is yours and you share what you own together, but you probably cannot expect your partner to share what she/he owns even if it was acquired during the relationship, perhaps with your support. is this what you want?

* Would you be at risk if one of you gave up work to concentrate on the home or bringing up children? Do financial arrangements need to be made?

* What would happen if you or your partner died? (Often the assets will revert to respective parents if you do not have children.) You are likely to need to make a will.