There are many misconceptions around the rights of the 3.3 million unmarried couple families in the UK.
The government has recently announced that heterosexual couples will be able to enter into civil partnerships in England and Wales, but there will still be many unmarried couples who see no advantage in a marriage or civil partnership. However, it is worth understanding some of the laws relating to co-habitation.
First, there is no such thing as a ‘common-law’ marriage. The nearest legal status, ‘irregular marriage’, only applied under Scottish law, and it was mostly abolished in 2006.
This means that transfers of investments between unmarried partners could be subject to capital gains tax, which would not apply to transfers between spouses living together. Yet, at the same time, the government can treat unmarried couples as if they were married for some tax and benefit rules such as the high income child benefit charge.
In case of the worst
Some severe consequences of not marrying are revealed at the most difficult times.
If an unmarried couple splits up, an ex-partner has no right to claim spousal maintenance or share of the other’s pension(s). They can only make a claim in respect of solely owned property if they can show they have made a financial contribution or have carried out repairs or improvements, which may not be the case if the non-owner stayed at home to care for children during the time they were together.
If an unmarried partner dies without leaving a will, the survivor will only automatically inherit property the couple owned as joint tenants. If the surviving partner does inherit under their partner’s will – including automatic transfers of jointly owned property – they could incur inheritance tax, even if it is their home. Married couples can use the spousal exemption to transfer any unused nil rate band and residence nil rate band to reduce IHT.
Surviving unmarried partners also won’t receive the state bereavement support payment, normally paid to widow(ers). A recent Supreme Court judgement questioned this practice, but as yet the rules have not changed.
A different approach to financial planning may be needed if you have not married your partner. To understand what that means for you and your partner, please get in touch.
The value of tax reliefs and tax treatment depends on your individual circumstances.
The Financial Conduct Authority does not regulate will writing, trusts and some forms of estate planning.
Tax laws can change.