The Myths of Unmarried Couples Cohabitating.

The Myths of unmarried couples cohabitating are causing concern for many when reviewing their finances and taxes.

Marriage rates are at their lowest point on record, while cohabitation is rising.

Despite this trend, many of these couples believe they have similar if not identical, legal rights to married couples; the truth is far more complicated.

As a result, tens of thousands could unknowingly expose themselves to higher tax bills.

Law of the Land

• England & Wales:

No single legal definition of cohabitation exists. Its interpretation depends heavily on the specific context, such as claiming benefits, tenancy agreements, or property ownership.

Cohabiting doesn’t grant the same legal rights and protections as marriage, and unmarried partners don’t automatically inherit from each other upon death.

• Scotland:

Cohabitation refers to individuals who are (or were) living together “as if” they were married or in a civil partnership. Offers limited rights and protections compared to marriage, like financial claims during separation under certain circumstances.

• Northern Ireland:

Currently, the law doesn’t legally recognise couples who cohabit. Unmarried partners have no legal rights upon separation or death.

This lack of consistency across the UK, coupled with the misconception of “common law marriage”, which research shows 46% of the population in England and Wales mistakenly believe in, can lead to confusion and potential legal complications for unmarried couples.

Remember: Living together as a couple, regardless of the duration, does not automatically grant the same legal rights and protections as marriage in any part of the UK.

It’s crucial to understand the distinct legal framework in your specific region and take the necessary steps to safeguard your interests.

Essential Steps to Consider:

The consequences can impact spousal maintenance payments on separation, tax reliefs and allowances, State spouses’ pension and bereavement benefits, property-owned tenants-in-common, assets on death, life assurance payments and IHT planning.

Dying Without a Will and its Impact:

A shocking 30 million adults in the UK lack a Will, leaving their assets vulnerable to intestacy rules.

If there is no Will,  then the estate will be distributed according to intestacy succession rules, and while the amount that surviving spouses and civil partners can receive in England & Wales has increased to £322k this year, unmarried partners receive nothing.

Under intestacy, unmarried partners inherit nothing, even after years of cohabitation. Read more here on Intestacy rules

Despite the myths of unmarried couples cohabitating, there are still many circumstances where surviving partners will not automatically inherit all assets on death.

In fact, if the deceased had children from a previous marriage only, they would be in line to inherit first, followed by the deceased’s parents, siblings, half-siblings, grand-parents or aunts/uncles and then the Crown, leaving the surviving unmarried partner with nothing.

Tenants in Common:

If owned on a tenants-in-common basis, both partners own different shares of the property and can pass on their share in their Will. However, if they die intestate, it forms part of their estate value and follows the intestacy succession rules above.

In this case, if the deceased had children from a previous marriage and/or with their surviving unmarried partner, the children would be in line to inherit first, in equal shares. What would happen if the grown-up children from the previous marriage wanted to sell or charge rent on their share?

Read here to find out if you need Life Assurance

Joint Tenancy:

Surviving partners automatically inherit the entire property regardless of a Will. While this ensures the surviving partner remains in the home, inheriting the full value can lead to a higher inheritance tax.

Create a Will:

This empowers you to control your assets’ distribution and grant specific rights to your partner, such as continued residence in your property.

A Will ensures your wishes are legally binding. By taking proactive steps like creating a Will and considering a cohabitation agreement, unmarried couples can secure their future and protect their loved ones.

Seek Professional Guidance:

Seeking professional help and advice can help you navigate the legal complexities and help create a personalised plan, considering your unique circumstances.

Remember:

Intestacy laws can have devastating consequences for unmarried partners. Different property ownership structures have varying inheritance tax implications.

Taking steps like creating a Will and seeking professional advice can provide security and clarity for your future.