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Happily unmarried: a financial guide for cohabiting couples

Today, plenty of couples live together without tying the knot or entering into a civil partnership. Usually, they don’t have all the legal rights that married couples or civil partners do. Here’s the steps cohabitees can take to keep their financial affairs in order. 

Today, plenty of couples live together without tying the knot or entering into a civil partnership. Usually, they don’t have all the legal rights that married couples or civil partners do. Here’s the steps cohabitees can take to keep their financial affairs in order. 

Written by
Anna McEntee
Insurance comparison expert
Last Updated
5 APRIL 2023
8 min read
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Millions of couples have chosen not to opt for marriage or a civil partnership. Everyone is different and there’s not one right or wrong way to live as a couple. But some may feel that a ceremony won’t change the way they feel about one another.  
What some cohabiting couples may not realise is the impact being unmarried might have on their financial circumstances in difficult times, such as a break-up or the death of a partner.  
While the vast majority of families are married or are civil partners (65 .8%), 18.6 % are cohabiting, according to 2021 figures from the Office for National Statistics. The statistics show that 3.6 million families have cohabiting couples at the heart of them.

Legal status of cohabiting couples

Many couples wrongly think that after years of living together they become common law partners, with the same rights and benefit entitlement as those who are married or in a civil partnership. In fact, the UK Parliament reported that 46% of people in England and Wales wrongly assumed that couples living together were in a common law marriage.

In law there’s no such concept as ‘common-law wife’ or ‘common-law husband’. Your rights are based on whether you’re married or in a civil partnership, not on how long you’ve lived together.

Cohabitation does provide some legal protection, including the laws relating to domestic abuse, but it doesn’t give any legal status to a couple. The legal status of either a marriage or civil partnership provides the basis of many important legal rights and responsibilities. Even if a couple have been living together for many years, their legal status does not change. If they split up or one person passes away, they don’t have the same automatic rights (including inheritance or financial support) as a couple who were married or in a civil partnership.

Scotland did have a cohabitation arrangement recognised in law, called “marriage by cohabitation with habit and repute”, but this ended in 2006. Only ‘irregular’ marriages that began before 4 May 2006 are recognised.

If you need to prove you were in this type of cohabiting situation, you’ll need to consult a solicitor. Generally, the information in this article applies to couples in England and Wales. If you live in Scotland and need more advice, see the advice from Citizens Advice Scotland.

Given that unmarried couples don’t have the same automatic rights as married ones, it pays to be organised with your finances.

How many people in the UK are cohabiting?

The number of people choosing to live together in a stable relationship, without marrying, has increased dramatically over the years. According to House of Commons Library data, the total number of cohabiting couples has increased from around 1.5 million in 1996 to around 3.6 million in 2021. That’s an increase of 144%. In 2021, 22% of couples who lived together were doing so as a cohabiting couple, rather than being married or in a civil partnership.

Tips to protect your assets as a cohabiting couple

Many of these couples may be unaware that cohabiting doesn’t give the same legal status as a marriage or civil partnership. Some of the risks for cohabiting partners are because they do not have:

That’s why we’ve put together some guidance of steps you can take if you’re living with your partner and don’t plan to marry:

1. Draw up wills

Married couples and those in civil partnerships can inherit under the rules of intestacy if their spouse or partner dies without making a will. But if you’re simply living together, you have no automatic right to inherit your partner’s estate. The rules are slightly different in Scotland.

By making a will, you can be sure that your money will go to the people you want it to.

You have three options when drawing up a will:

  • use a solicitor
  • use a will writing service
  • do it yourself

Using a solicitor gives you the greatest protection, particularly if your financial affairs are complex. Doing it yourself, with a template or online form, could be the riskiest option and may only be suitable if your situation is straightforward.

Your main legal option if your cohabiting partner passes away without a will is to make a ‘family provision claim’. If you’ve been living together for two years, this is a type of financial claim you can make against the estate of the deceased.

See more on making a will

2. Get a cohabitation agreement.  

This is a legal document that sets out exactly what assets each person is bringing to the relationship, and how they should be divided if it breaks down. It should cover things like your home and its contents, personal belongings, savings and so on. Also, it can set out how much someone has contributed to the mortgage deposit and repayments.  
Cohabitees have no legal rights to remain in a property or to take a share of any assets not owned by them, should they separate. Drawing up a cohabitation agreement lets each partner understand what will happen if they split up. 
This can be especially helpful if the property is owned by one person, but the other has helped pay the mortgage. It could help ensure that you have a right to a share of the home, should you split up. 
The agreement can also cover things like responsibility for bills, joint credit cards and bank accounts. You can even use it to set out how you’ll support your children.  
Costs for having a cohabitation agreement drawn up by a solicitor range from around £1,000-£3,000. It may be worth it, depending on the value of the property. Couples may also want to make sure that both partners get independent advice, so it might be sensible for one partner to get the agreement reviewed by a different solicitor.  
The charity Advice Now has a template you can use to create your own version of a Living Together Agreement. The booklet, which can be downloaded for a fee, has a lot of guidance to help you discuss what you want to happen. 
Cohabitation agreements could be especially helpful if you split up. That’s because you should both know where you stand with your financial arrangements - possibly reducing the potential for arguments. 

3. Consider a declaration of trust

A declaration of trust is a legal document relating to property ownership. It sets out the proportions in which two (or more) individuals own a property, so it’s ideal for unmarried couples. It’s designed to formally reflect the agreed wishes of the people involved and will set out how the net value or equity in the property would be split in the event of a future sale. It helps avoid any disagreements or confusion should a couple split up or one partner passes away.

4. Think about your tax position

Make sure you understand the differences between what would apply to a married couple or civil partners, and your situation as cohabitees. For example, if you’re married, assets left to a spouse are automatically exempt from Inheritance Tax, and unused Inheritance Tax allowances can be passed on to the surviving spouse or civil partner.

Savings and investments can also be freely moved between spouses without the risk of Capital Gains Tax or Inheritance Tax.

If you’re cohabiting, you may want to take tax advice to ensure that you manage your financial affairs in the most tax efficient way. That could be helpful if you want to transfer assets between you.

The Marriage Tax Allowance applies when one partner in a married couple or civil partnership is a basic 20% rate taxpayer and the other a non-taxpayer. For example, you or your partner might be a stay-at-home parent or earning less than £12,570 a year.

The non-taxpayer can ask to have £1,260 for the tax year 2023-2024 of their tax-free allowance moved to the taxpayer. That means £1,260 of income they would have been taxed on at 20% is now tax-free – a £252 gain. However, this option is not available to cohabiting couples.

5. Check your pension situation

If you’ve paid into pension schemes, you need to check whether they’ll pay out to an unmarried partner in the event of death.  
The provisions of occupational and personal pensions for dependants of a pension scheme member will depend on the rules of the scheme. Most schemes offer benefits to dependent children and some will offer benefits to a dependent partner. The scheme administrator should be able to tell you what the situation is. 
You may have to complete an expression of wishes form to assign your pension to your partner, to make it clear where you want your benefits to go after your death.  
Unmarried couples are not entitled to receive the state pension for deceased partners.

6. Review your banking situation

If you live with your partner and have separate bank accounts, neither of you can have access to the money in the other’s account – so if one person dies, the balance of their account will be the property of their estate. As we have explained, unless a will specifies otherwise, the partner of the deceased doesn’t have an automatic right to this money.

If you have a joint account with shared access, and one partner passes away, the other will still be able to use the money and can continue to access the account. However, a proportion of the balance will be taken into account when as a part of the total value of their estate. If you have a joint account and you split up as a cohabiting couple, you need to decide how to split the money. If you can’t agree, you may have to go to court.

7. Make sure you have adequate life insurance

The rules that apply to married couples and civil partners when their partner dies, don’t apply to unmarried couples.

For example, unmarried couples are not entitled to receive Bereavement Support Payment for deceased partners. If you’re living together, you’ll need to understand what this means for you.

You may need to put a safety net in place, so you can cope financially at a time of bereavement – particularly if you have children. Bills like the mortgage or rent, gas and electricity will still need to be paid when you may have only one income.

If your partner dies, you may need to stop work or cut back. If you’re a non-working parent who has lost their partner, you may not be in a position to find work to replace their income.

Life insurance could help. If you take out a life insurance policy naming your partner as the beneficiary, they could receive a pay-out on your death, providing a safety net to allow them to cope financially. Putting the life insurance policy in trust for your partner can help protect the pay-out from inheritance tax, so they receive more of the money, sooner.

Find out about the different types of life insurance available, to see which one could be best suited to your needs.

You may also want to consider the pros and cons of Joint Life Insurance.

If you’re sure how much life insurance you might need, try our life insurance calculator.

Also, if your employer offers death-in-service benefits, make sure your partner is named as the beneficiary.

Knowing exactly what your financial situation would be, allows you to plan to make your financial future more secure.

Calls for reform of cohabitation rights

Over the years, there have been calls for reform so that unmarried couples living together in England and Wales have similar rights to married couples. As reported by The Financial Times, some family lawyers say that women, in particular, can be disadvantaged by the current lack of protection.

That’s because if one partner has scaled back their career to focus on childcare, that homemaking contribution is usually considered by the courts for divorcing couples. But this type of non-financial contribution made by one partner can be ignored in the breakdown of a relationship between a cohabiting couple. Although one partner can apply for financial support for the benefit of any children, there’s no right for them to claim any maintenance for themselves.

In November 2022, the UK government said existing reforms around marriage and divorce needed to be completed before any new legal changes for cohabitants could be considered. The delays emphasise the need to raise awareness of the lack of legal status of cohabitation, so that couples can take measures to protect themselves.

Cohabiting couples FAQs

What happens if I’m renting a property with my partner and we split up?

If both of your names are on the tenancy agreement, then you’re equally responsible for the rent and other tenancy conditions listed. If you split up, you would need to get the tenancy agreement updated and agreed with the landlord or lettings agency.

If you’re the unmarried partner of the named tenant, then you will usually have no rights to stay should your partner ask you to leave. If you need to stay, you’d have to get the advice of an advisor, such as a family law solicitor.

What does next of kin mean?

A traditional term, next of kin typically refers to a person's closest relative – for example, a husband, wife or civil partner, parent or adult child. Many people assume next of kin has more legal standing than it does – for example, that your next of kin automatically takes on legal rights and responsibilities on your behalf. This isn’t the case. The only situation when a next of kin automatically has the right to make decisions on someone’s behalf is when that person is under 18 and their next of kin is their parent or legal guardian.

So if you’re asked to name a next of kin (for example, if you’re going into hospital), you can name whoever you want, including your partner who you’re cohabiting with – regardless of if you’re married or not.

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