Pension

Little glossary of cohabitation

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More than a million Swiss live this way, but only very few are actually aware of all the legal aspects of cohabitation. How does inheritance law work, what are the financial advantages and disadvantages of not being married and what is it important to know when it comes to children? Read our glossary and improve your knowledge of cohabitation within just a few minutes!

Accident

Whether married or not, no-one is immune from misfortune such as an accident or disability as a result of illness. It is also that much more important for cohabiting couples to protect the partnership against financial difficulties: Protect yourselves against occupational disability.

AHV

In a cohabitation arrangement, you and your partner make provision for retirement independently. Provided you are both working, each of you will receive your own AHV pension at retirement age which, unlike for married couples, is not reduced. To ensure that this occurs, it is important that you both pay AHV contributions in full. Should either of you not be able to make provision or only do so on a minimal basis due to running the household or looking after children, the other may take over payment of AHV contributions on a joint basis during this period.

Checklist

As with so much in life, cohabitation also has its advantages and disadvantages. It means that you and your partner have no obligations whatsoever, but at the same time, your partnership does not offer any form of legal protection. If you would like to have more commitment for your relationship but still do not want to get married, this practical checklist gives a good overview of which binding arrangements make perfect sense in which areas of life.

Cohabitation Agreement

A cohabitation agreement is a tried and trusted format for individual arrangements. In it, you can specify all points and set out what is important to you. For example, how you divide the household bills, who can remain in the shared home if you separate or how custody rights and access to joint children would be handled. A written agreement helps avoid disputes in the event of separation, but it is also evidence of your relationship – for pension institutions for example. Read the legal blog on myright.ch to find out how to draw up a cohabitation agreement (in German) properly. 

Freedom of Form

If you decide to cohabit, you do not have to make any official declaration or sign anything. Cohabitation is based solely on implied actions, such as renting somewhere to live together. Just as informal as it is self-contained, cohabitation can of course be ended at any time. 

Future

Today, well over 20 percent of Swiss couples live together without being married, and this constantly increases the pressure on politicians to modernize family law and eliminate the legal discrimination against unmarried couples. Vision for the future: Civil partnerships following the French model where the Pacte civil de solidarité has been in place for more than 20 years which makes things easier in tax and inheritance matters as well as for support and information rights. Until this is the case, this checklist will help you to legally protect your non-marital partnership.

Heirs

Do you know who inherits your estate if you are not married when you die? This primarily depends on your actual family set-up: In this instance, close family members such as parents or children are entitled to a compulsory portion. However, your loved one would receive nothing under the law if you do not take steps first by specifying testamentary beneficiaries or beneficiaries under a contract of succession. As such, it is important to know the following: Legacies between unmarried couples are always subject to inheritance or gift tax.

Home Ownership

If you buy a home together as an unmarried couple, there is a great deal to consider and even more to agree. What happens to your own four walls if you separate or one of you dies? Who pays the interest? And what happens if this exceeds your own financial possibility at some stage…. These types of question and many more should be answered by a professional advisor.

Inventory

Mine? Yours? Or ours? An inventory list helps separating cohabiting couples avoid disputes about joint possessions. Here’s what you should do: In the good times, make a list of items and assets that you or your partner brought into the relationship, acquired together or are in a joint account - and don’t forget to keep the list updated. 

Joint Children

Do you already have or are you planning to have children together as an unmarried couple? As many statutory automatic procedures relating to parenthood do not apply without a marriage certificate, there are a couple of things you should bear in mind. For example: From a legal perspective, the child’s father is not automatically regarded as the father. For unmarried parents, paternity must be officially recognized at the registry office where you both also have to declare joint parental care. Without a marriage certificate, you would also be well advised to decide at the outset what would happen if you separate as parents. Who would your children live with, who would pay how much maintenance and how would access be arranged?

Legal Nature

Cohabitation is a de facto partnership. And although it represents legal reality and can also involve legal consequences in its stable manifestation, this form of partnership has so far not been legally regulated. 

Legal Protection

Married couples have legally protected rights and obligations. These are integrated in legislation and linked to automatic procedures in favor of the other married partner. It is the exact opposite for unmarried couples: As the law contains almost no rules for cohabiting couples, you must yourselves bring the required obligations into your relationship, ideally with professional and/or legal advice for complex subjects such as home ownership, joint children and protection. 

Life Insurance

If one partner dies, the surviving one may quickly fall into financial difficulties, but in purely legal terms, no kind of claim can be made in a cohabitation arrangement. Life insurance may help to at least limit the financial hardship, and may even make sense in terms of inheritance and inheritance tax. You should therefore arrange for life cover for each other.

Living Will

If you do not want to miss out on the support of your better half in a medical emergency, you should record this in a living will. Because without one, doctors are not allowed to give unmarried people information on the partner’s health condition, and you are not allowed to represent your partner in respect of medical measures - and vice versa. You can download for free a sample copy of a living will from myright.ch.

Marriage Penalty

The marriage penalty is an informal expression for the tax discrimination of married couples over unmarried ones. Double-earning married couples with high salaries are affected the most: Their income is assessed jointly and taxed more severely due to progressive tax schedules. Even AHV pension payments are combined for retired married couples: they receive one-and-a-half times the pension amount rather than double. If both partners have worked for a long time and made contributions, this is tantamount to a pension reduction compared to unmarried couples.

Name

Cohabiting couples keep their last names. The same applies if cohabiting couples have children. But what happens about the name of joint children? The rule of thumb is that if both parents have joint parental care, they must choose from either name and register this at the registry office. If one parent has sole care, then the child bears that parent’s last name.

Occupational Pension Provision

You are both independently responsible for occupational pension provision. At retirement age, the saved retirement capital is paid to you either as a pension or as a single capital lump sum. But what happens if you don’t even reach the reference age? Some pension funds provide the option of using saved capital to protect your “better half”. It is worth finding out whether your pension institution normally allows for making payments to unmarried partners and if so, give the partner’s name.

Open Relationship

Even if the man and woman have no legal obligations towards each other, the cohabitation can in no way be compared to an open relationship. The term describes more the relationship between two people of different genders who feel spiritually, emotionally, physically and financially committed to each other. How open or tolerant the couple in question practice this relationship is purely a matter for them.

Pillar 3

Making provision with Pillar 3 products is especially worthwhile for cohabiting couples. To save capital for retirement of course. But also because they offer unmarried couples the best options for mutual protection in an emergency. The tax-effective tied pension provision (Pillar 3a) gives you the option of nominating your partner as a beneficiary in the legally prescribed sequence (biological children always take priority), in case anything were to happen to you. Voluntary Pillar 3b is even better suited to protect cohabiting partners: Whether you make provision with savings, bank accounts, life insurance, bonds, money market investments, equities, securities funds or home ownership, you are completely free to chose the beneficiaries down to the compulsory portions.

Power of Attorney

Regarding accident: Without the express release from the duty of confidentiality, doctors are not allowed to give out information or permit visits to intensive care without first having the declared permission. Unmarried couples should therefore make arrangements where, in a declaration, they give each other visiting rights, release doctors from their duty of confidentiality and allow their partner through a living will to represent them in terms of medical measures. A power of attorney and disclosure authority for dealing with authorities, insurance companies and banks are also advisable forms of authority for cohabiting couples to have in place.

Qualified Cohabitation

From a legal perspective, there are various stages to cohabitation. But the actual classification of the partnership is only important if specific legal questions have to be answered, such as if you or your partner asserts maintenance claims against a former spouse. These would actually be irrelevant as soon as your current relationship is regarded as qualified cohabitation, which is when cohabitation is seen as a household sharing accommodation, table and bed. 

Rent

In line with this way of life, most unmarried couples do not want to be tied down either when it comes to living arrangements, therefore they rent. What worked perfectly in the good times can soon lead to problems when they are not so good. If you have both signed a tenancy agreement, you are jointly and severally liable to the landlord and can only terminate the agreement together. It is easier if one of you is the lead tenant and the other is officially a sub-tenant. But you should not do this either without having first agreed what would happen if you were to separate - and this means contractually.

Separation

Leaving aside the emotional damage, separation for cohabiting couples is theoretically no big deal - ultimately you have not entered into any legal obligations with your partner and you can go your separate ways at any time. The reality is often different: The longer and more binding the relationship was, the more you have given (up) in the process. And this could also spell all the more trouble. For instance, if there is a financially weaker party who was more involved in running the home and neglected their own pension provision and is now left empty-handed. Or if there are joint children who still need to be cared for. The longer the relationship continues, unmarried couples must definitely make an agreement that deals with and fairly governs what happens in the event of separation and its (financial) consequences.

Tax

Unlike married couples, both cohabiting couples complete their own tax declaration. Their income and assets are taxed individually which can often mean a particular advantage in terms of direct Federal tax compared to married double-earners, as tax progression has less of an impact.

Xenia or Xeno

If you enjoy unusual names, then it’s perhaps time to consider having children with your partner. And the next step would be how you can best protect your children and family. Here you will find tips on the subject of cohabitation with children.

Yippie!

You have a real reason to be happy if you can check all the points on this checklist. Then you’ll not only know for definite about the advantages and disadvantages of cohabitation, but also that you have protected your non-marital partnership as best you can, whether with or without children. 

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    How can cohabitation be protected?

    Pillar 3a is an ideal instrument for helping cohabiting couples protect against risk. Find out here which other measures are advisable for unmarried couples:

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