The 10 Risks Unmarried Couples Need to Address
Living together as a couple or with a lifelong friend without legal and financial protection could lead to serious consequences. Senior personal finance analyst at Hargreaves Lansdown, Sarah Coles, warns of ten significant risks that unmarried couples may face.
1. Estate distribution: If one partner passes away without a will, the other could be left with nothing. If the home is in their name, the other may lose their home too, as everything could go to the partner’s children or parents.
2. Pensions: Most pensions will pay out to a spouse in the event of death. Unmarried couples must complete a ‘nomination of beneficiaries’ form to confirm that they would like their inheritance to be passed on to their partner.
3. Inheritance tax: If unmarried couples breach the inheritance tax nil rate band, they may face paying tax. This could lead to the inability to afford to keep their home.
4. Property ownership: If one partner owns the property in their name, the other has no right to live in it or have a share in it if they break up.
5. Parental rights: If one parent dies, and the father is not on the child’s birth certificate, it does not automatically give him the right to care for the child.
6. Inheritance tax benefits: In a marriage or civil partnership, if one person dies and leaves everything to the other, it would be free of inheritance tax. This is not the case for unmarried couples, leading to possible inheritance tax consequences.
7. Inheritable ISAs: Only married couples are entitled to an additional ISA allowance called an Additional Permitted Subscription.
8. Spousal maintenance: Unmarried couples are not entitled to spousal maintenance if they split up, especially if one partner sacrificed their career for child-rearing duties leading to a significant financial shortfall for them.
9. Property interest: If the property belongs solely to one partner, but the other contributed towards the bills or home improvements, they may be entitled to claim an “interest” in the property.
10. Property division: If unmarried couples break up, there is no division of property or support until they take the matter to court.
The US has seen a decline in marriage rates of 37%. This trend implies that more couples are still living together without the legal protection of marriage. However, these shocking risks could be avoided if unmarried couples take legal actions.
According to data published in 2021 by the Office for National Statistics (ONS), marriage rates among opposite-sex couples dropped to a historic low in 2020.
As of 2019 (the latest year for which statistics are available), there were 3.4 million cohabiting couples in the UK, representing a 25.8% increase from 2.7 million in 2008.
Couples who decide to live together without being married or taking legal precautions expose themselves to higher risks that could lead to significant financial and legal consequences. Thus, it is wise for couples in such relationships to consult legal and financial experts to ensure they have adequate protection.
Unmarried couples should take note of the ten risks they face if they fail to take legal precautions. Cohabiting together without the legal protection of marriage poses significant risk, and the consequences can be devastating. Couples willing to live together can protect themselves by taking legal advice and creating an agreement that will protect both parties in the event of separation, financial loss, or unexpected death.