Later Life Planning for Unmarried Couples
The UK has seen a massive increase in the number of unmarried, cohabitating couples – from 1.5 million in 1996 to 3.3 million in 2017. It’s tempting to believe that the law will have caught up with this change. In truth, unmarried couples are at considerable financial risk when it comes to inheritance.
If you are in an unmarried relationship, it is vitally important that you make a Will. Without one, your partner may be left with nothing when you pass away. The reason for this is the current Rules of Intestacy. They decide how someone’s estate is distributed if they pass away without leaving instructions in a Will. The law gives priority to spouses and civil partners first, then children, then parents, and then siblings.
For a married couple or those in a civil partnership, the Rules of Intestacy mean that the surviving spouse inherits the first £250,000 of the estate, and 50% of anything above this if you have children. However, this does not apply to unmarried couples. Even long-standing cohabitants are not provided for under these rules, with no legal entitlement to anything from their partner’s estate.
Regardless of how long a couple has been together, this kind of relationship is not recognised by law, even if you have children or grandchildren together. Any children will be entitled to the estate’s assets alongside children from previous relationships.
The Truth about Common Law Marriage
It is widely believed that UK law acknowledges common law marriage – providing similar rules for long-term unmarried couples and married ones. However, this is not the case and the misunderstanding could end up being very costly.
Simply put, if you’re not married or in a civil partnership, your partner won’t legally be entitled to inherit anything when you die.
Under these circumstances, your partner won’t have direct access to any of your assets. Even things that you personally own but shared with your partner – a car, for example – wouldn’t belong to them. This situation is made even more serious if your partner is financially dependent on you.
Your partner can make a claim to your estate under the Inheritance Act 1975. This can be a time-consuming and expensive process, however, and there is no guarantee of success.
The only way to ensure that your partner inherits from you is to make a Will. You can name your partner as a beneficiary, setting out exactly what you would like them to receive. Planning ahead now gives you the reassurance that your loved ones won’t have to deal with financial worries on top of bereavement,when the time comes.
If you’d like to discuss getting your Will written or updated, read more about our Will Writing service here.
What Happens to Property?
Whether your unmarried partner will inherit your share of your property depends on the type of ownership you have. There are two main types of property ownership for couples: Tenants in Common and Joint Tenants. You can learn more about the details of these arrangements here.
As an unmarried couple registered as Tenants in Common you can own different shares of the property. This is usually a 50/50 split, though it doesn’t have to be. The percentage you own may depend on how much you contributed to the deposit, or the amount you pay towards the mortgage.
A house owned as Tenants in Common is subject to intestacy laws, and your share will be treated as part of your estate. This means that the property doesn’t automatically go to your partner if you die, and your share of the house could be inherited by someone else. You will need to make a Will if you want your partner to inherit your share.
If you’re an unmarried couple registered as Joint Tenants, you both have equal rights to the whole property. Regardless of the circumstances of your relationship, any jointly-owned property automatically passes to the surviving owner when the other dies.
Should they become the single owner of the property, your partner will need to reapply for the mortgage in their sole name if your home has an outstanding joint mortgage. The property may need to be sold if they are unable to afford the payments. However, if you have organised life insurance, this could be used to pay off the remaining debt, or reduce it to a level that your partner can afford.
If you solely own your home, it will pass on to whoever is entitled to inherit it under the Rules of Intestacy. This applies even if your partner still lives in the property, and they may be forced to find somewhere else to live, depending on the desires of your inheritors.
Pensions can prove a challenging situation for the surviving partner of an unmarried couple. Legally, your partner is not entitled to receive your state pension or bereavement allowance when you die, if you are unmarried. This is regardless of what you leave to them in your Will. Private pension schemes, for the most part, also exclude unmarried couples, even if you live together.
Issues can arise in some schemes paying out to unmarried couples in the event of death, particularly when it comes to occupational schemes. Most will deal with married partners, but may not do so with unmarried couples.
Unmarried couples can take steps to reduce the risk of losing out on their partner’s pension. Each partner can complete an Expression of Wish form, to tell their pension scheme where they want their benefits to go when they pass away. If you are living together, you should name your partner.
That being said, this declaration is not legally binding. Getting professional guidance is always a good course of action in such complicated matters.
How We Can Help
If you’re in an unmarried relationship, Severn Estate Planning can provide you with sound advice to ensure you and your partner’s peace of mind.
With over 50 years of experience, our consultants are experts in Wills, inheritance, financial planning, and many other areas. Working with leading Solicitors, Accountants and Independent Financial Advisers, you can feel secure and prepared for the future, without having tie the knot. Contact us today to start planning ahead.