Sarah Coles, head of personal finance at AJ Bell, comments: “The estimated number of older people living together without tying the knot has risen more than 50% in just ten years. We’re not trying before we’re buying – increasingly people aren’t buying into the whole idea of marriage at all: most cohabitees under age 65 have never been married to anyone.
“There are all sorts of reasons people might not be keen on the legalities. If the couple met when they were older, after one or both had a former spouse pass away, they may have death benefits they could lose if they tied the knot again.
“They may also have children from a former relationship and they want to protect their assets in the event the marriage came to an end. If that is the case, it’s worth keeping an eye on proposed changes to the rules around cohabitation, which are expected to give cohabiting partners some rights after they have lived together for a certain number of years. It may mean they don’t have the protection they expect.
“Regardless of why they choose not to get married, they are running some financial risks that could seriously damage their finances, especially in the event of a split, or if their partner passes away. As you get older you have more to lose, less time to make up for losses, and the chance of your partner dying increases. It means it’s vital to understand the risks and take steps to protect yourself.”
If you split up, you have no right to your partner’s pension. If you’re retired, this could wipe out the lion’s share of your income, with no time left to rebuild. It’s why building pensions in your own name is so important.
You have no right to any spousal maintenance – payments made to a former partner after separation - even if you have given up work to care for your children and all private pensions are in your partner’s name.
In the event of a split, you have no right to any assets unless they’re held jointly or in your own name. It’s why you need to consider the ownership of assets carefully. Similarly with debts, there’s no right for them to be split fairly, even if you borrowed in your own name for joint expenses. It’s why you need to be careful about how you borrow. You can also draw up a cohabitation agreement to lay out what would happen in the event of a split, which could prove useful if you end up in court.
If your partner owns your home in their name alone, you have no automatic right to a share in it if you split, even if you contribute towards bills and the mortgage. If this happens later in life, you could have to move out with no way of paying for a roof over your head. It can make sense to change the ownership of the property to reflect your contributions in order to give you those rights. If you own the property, your partner can make a claim for some of the value in it if you split up. They would need to go to court and it’s difficult to prove, but it can be done.If either partner dies without a will, their assets are split according to intestacy rules. That means the children of the person who passes will inherit their assets, and if they have no children it will go to the parents, then siblings. The rules give nothing to unmarried partners. If you own property jointly or have joint accounts you will receive these, but nothing else. It’s one reason why it’s so essential for unmarried couples to have up-to-date wills.
If they die without completing a nomination of beneficiaries form for their personal pension, it’s up to the pension trustees as to whom receives any death benefits. The trustees will require you to evidence your dependence on your partner but they may also choose to follow any expression of wish your partner had given them. It’s important to understand who your partner has nominated. If you’re relying on this pension as your main income, this can be devastating.
If they have life insurance that isn’t written in trust it will pay into their estate when they die. If they don’t have a will, it will be distributed according to intestacy rules, so their partner could receive nothing. If they have death in service cover, and they haven’t told their employer it should pay out to you, there may be the discretion to pay to a long-term partner, but there will be a need to investigate the circumstances and there could be a delay.
You can’t take advantage of the rules that apply to married couples on death, which let you pass as much of your assets to your spouse without inheritance tax (IHT) after your death. Within marriage IHT is calculated on the death of the second partner and nil rate bands can be transferred to your spouse, effectively resulting in a married couple having twice the IHT exemption of a single person. Unmarried couples don’t have this benefit at all, so if you’re leaving more than your nil rate bands there will be IHT to pay. It means it’s worth considering gifts during your lifetime, which may escape the IHT net.
You can’t inherit state pension rights if you’re not married. For married couples, these rights only exist if you retired before the introduction of the new state pension in 2016 or have protected payments under the old system, but they can make a significant difference
You have fewer rights when it comes to bereavement support payments too. These may apply if you’re married and you are under state pension age when your partner dies. However, these only apply to unmarried partners when they also qualify for child benefit – or if they’re pregnant. This becomes less likely when they’re older.
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