For many couples, living together without being married feels like the perfect arrangement.
However, in England and Wales, this setup comes with legal and financial risks that are often misunderstood. The term "common law marriage" is a myth. Cohabiting couples, no matter how long they’ve been together, don’t automatically share the same legal rights as married couples.
So, what does this mean for you, and how can you protect yourself and your partner?
What Are the Risks?
- No Automatic Right to Inherit
If one partner dies without a valid will, the other won’t automatically inherit their estate. This could leave the surviving partner without access to property, savings, or investments they believed they had a claim to. - Limited Financial Support After Separation
Unlike divorcing married couples, cohabiting couples don’t have a legal obligation to provide spousal maintenance upon separation. Financial claims are typically limited to property ownership and, in some cases, child maintenance. - Property Ownership Disputes
If the property you live in is in one partner’s name, the other partner has no automatic claim to it, even if they’ve contributed financially to the household. Proving a financial interest can be complex, time-consuming, and costly. - Pension Rights
Unless explicitly named as a beneficiary, a cohabiting partner may not have access to the other partner’s pension if they pass away. Married couples, on the other hand, often have automatic rights to spousal pension benefits. - Inheritance Tax Implications
Unmarried partners are not exempt from inheritance tax on assets passed between them. This could lead to significant tax bills at an already emotional time.
How to Protect Yourself
While the legal landscape may not currently favour cohabiting couples, there are steps you can take to safeguard your financial wellbeing, and that of your partner:
- Create a Cohabitation Agreement
A cohabitation agreement is a legal document that outlines how assets, debts, and responsibilities will be handled both during the relationship and in the event of a separation. It can provide clarity and avoid potential disputes later down the line. - Write or Update Your Wills
Ensure your wishes are clear by creating a will. This is especially important if you want your partner to inherit assets such as property, savings, or personal belongings. - Review Your Pension and Protection Policies
Check that your partner is listed as a beneficiary on your pension, life insurance, or other protection policies. This ensures they’ll be provided for if something happens to you. - Understand Property Ownership
If you’re buying a property together, ensure it’s clear whether you’ll own it as joint tenants or tenants in common. This distinction affects your legal rights to the property in the event of separation or death. - Plan for Inheritance Tax
Speak to a financial adviser about strategies to reduce inheritance tax liabilities, such as gifting or using trusts, to protect your partner from unexpected financial burdens.
Why It’s Important to Seek Advice
Navigating the complexities of finances as a cohabiting couple can be overwhelming. Legislation to better protect cohabiting couples has been proposed by the Law Commission, such as an opt-out scheme to safeguard vulnerable partners. However, change is slow, and current laws still leave many at risk.
By working with a financial adviser, you can create a tailored plan that addresses your specific circumstances and ensures both partners are protected. Whether it’s drafting a cohabitation agreement, reviewing your pension and protection policies, or updating your wills, professional advice can provide peace of mind and financial security.
Final Thoughts
Cohabiting without being married may work perfectly well for your relationship, but it’s essential to understand the potential risks involved and take steps to protect yourselves. Financial planning isn’t just about managing your money; it’s about ensuring that your partner and loved ones are cared for, no matter what the future holds.
At Willow Tree Financial Services, we’re here to guide you through these decisions with empathy and expertise. If you’d like to know more about how we can help, don’t hesitate to get in touch.
Remember, planning ahead now can save you from unnecessary stress and financial difficulties later. Your financial wellbeing is our priority. Let’s work together to ensure that no matter your relationship status, you have the protections you need to thrive.
To book a financial advice appointment with me click here, call 01323 436680 or book directly onto my calendar here.
Willow Tree Financial Services are a Financial Adviser firm based in Polegate, East Sussex, UK. We specialise in Financial Planning, Mortgages, Investments & Pension Planning, Protection & Insurance Wills, Trusts & Estate Planning.
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