Co-habiting couples face losing thousands – find out how to safeguard yourself

With co-habiting couples being the fastest growing family type in the UK, long term unmarried partners are increasingly at risk of losing out on thousands of pounds due to ‘outdated’ laws that seemingly favour married couples and traditional family set ups.

Taxes, inheritance, pensions and property are all affected and it is estimated that at least half of co-habiting couples are unaware of the legal variations and financial impact, particularly on death, of being unmarried.

These differences came under the microscope last month, when unmarried woman Denise Brewster won the right to her partner’s ‘survivors pension’ following a landmark ruling by the Supreme Court.  The outcome of this case effectively eradicates the requirement of providing nomination forms for those people in unmarried long-term relationships.

Despite this, co-habiting couples continue to be financially exposed to potential losses that may result in thousands of pounds of their long-term partner’s assets being swallowed up in the event of separation or death – and experts are warning that more needs to be done to alert co-habitees and educate them of the possible impact of not having their personal affairs in order.  Furthermore, they estimate that of the 3.2 million co-habiting couples in the UK, approximately 80% have never sought any form of professional guidance, and up to two thirds do not have a valid, legal will in place – something that could further exacerbate financial loss should one half of a co-habiting couple die suddenly.

Jennifer Cook, who lives in Barnes and co-habited with her partner, Paul, for over 8 years until he passed away suddenly in 2013, said:

“Losing Paul was utterly horrendous and a really awful time emotionally.  Added to my stress was the fact that neither Paul or I had ever seriously discussed what would happen if one of us were to die, or made any provisions for a will.  This meant when Paul passed away everything was turned upside down.  Only Paul’s name was on the deeds to the property we shared so I found the house I had been living in, contributing to, and called my home throughout our relationship wouldn’t automatically pass to me as he had no legal will in place.”

Declan McCusker is a partner at Mayfair chartered accountants Perrys.  He said:

“At least three out of the five new clients we meet will be unaware that they are personally financially exposed due to their living arrangements and family set up so this is an extremely common problem. 

“Often, it is something that is only brought to our clients’ attention after they’ve approached us and we have discussed other non-related business requirements with them that have resulted in us delving deeper into their personal circumstances and uncovering the loopholes in their current arrangements.”

Unlike in married relationships, there is no automatic right to inherit if your long-term partner passes away, which leaves a question mark over, not only property ownership, but also the amount of inheritance tax an individual is liable for.

Declan continued:

“Married couples who have a life interest trust of the share of a property would be liable for a lower rate of inheritance tax versus a co-habiting couple who would effectively be paying double the amount under the same rule.  To mitigate their liability a co-habiting couple would need to opt for a discretionary trust.  However, this would only be enforceable if it was stipulated as part of their respective wills.”

Nearly four years after Paul died, Jennifer is still trying to deal with the impact and unravel the tangle of their financial affairs and living arrangements.

“If I could turn the clock back I would definitely make sure both Paul and I had a will at the very least.  It would’ve saved a great deal of additional heartache,” she said.

Declan added:

“I would urge co-habiting couples to seek appropriate professional advice to ensure they understand where they stand in the event of separation or death.”

To find out more about how we can help you with the issues raised in this article, please contact your local Perrys office or complete our contact form.