6 Financial Considerations for Cohabiting Couples
Couples who cohabitate but aren’t married don’t get the same rights as married couples, so it’s important to consider the next steps to take. This article is going to lay out six financial considerations for cohabiting couples.
Some people choose not to get married, but cohabitation risks are always there, no matter your marital status. That’s why it’s important to consider the next steps to take for future financial protection if you ever break up or one of you passes away.
From 2008 to 2018, there was a 2.6 percent rise in the number of families living together that aren’t married, which is a total of 3.4 million families. This makes them the fastest growing family group in the UK.
So, to find out how to protect yourself financially when cohabiting with your partner, keep reading to learn more about the six considerations cohabiting couples should make regarding their finances.
1. Making Your Wills
It’s easy to presume that your significant other would be entitled to your assets if you pass away without a will. But, unless you’re married or direct relatives, they won’t receive a penny of it, even if you intended for it to be left with them.
Having a will means that you can lay out exactly what you would like left with particular people, such as your unmarried partner. Drafting a will isn’t necessarily expensive, and it can prevent problems from happening in the future. So, for cohabitating couples, it really is essential to do.
2. Consider a Cohabitation Agreement
Break ups can happen to the best of us, even if you didn’t ever think it was possible in your relationship. That’s why it is wise to contemplate a cohabitation agreement, even if you never have to use it in the future.
No matter how long you have been in a relationship or have lived together, non-married cohabiting partners have no legal rights over assets that aren’t in their name. Even if, for example, you contributed towards mortgage payments, if your name isn’t on the contract, you are owed nothing.
A cohabitation agreement will lay out what assets the relationship has, who brought what and how they would be divided if the relationship ended. Assets would include property, property contents, personal belongings, savings, and investments. It also can include arrangements for children and pets too according to this epxert who is know for drafting cohabitation agreement Ontario.
3. Arrange Property Contracts
Sometimes, purchasing property when you are not married is best to be treated like a business transaction, just in case something goes wrong, even though we like to believe that won’t be the case.
When buying a property together, you have the choice of two contracts. You can either be joint tenants or tenants in common:
• Joint tenants are where both partners own the whole property and have equal rights to it. Even if one person passed away, the other person would automatically obtain the deceased person’s share.
• Tenants in common are where each person owns a share of the property, either equal or a different percentage. If one person passed away, their share of the property would be passed on to their estate.
4. Pensions
Again, similar to the other aspects we have spoken about in this article, unmarried couples are not automatically entitled to receive their partner’s state pension, pension scheme (in some instances), or bereavement allowance.
It is, however, possible for cohabiting couples to fill in a form declaring where they would like their pension to go upon their death. That said, this does not mean that it is a legally binding agreement.
5. Tax Benefits
There are many tax perks that come with couples who choose to marry or be in a civil partnership that, unfortunately, cohabiting couples are not entitled to. Some of the perks include:
• Transfer ownership between themselves with no tax liability.
• Married couples can pass their estate on without inheritance tax liabilities.
• Additional tax break – if a spouse or civil partner doesn’t pay tax or didn’t earn enough to pay tax, they can transfer up to £1060 of their tax-free allowance (so long as the other spouse or civil partner does not exceed the basic rate).
6. Financially Supporting Each Other
Married couples have a legal duty to financially support each other. If someone is not financially supporting their spouse, they can apply for a court order.
For couples who are not married, they have no legal obligation to financially support one another. It’s important to note that financially supporting children, however, is different whether you are married or not.
You Don’t Have to Marry for Financial Purposes
If marriage isn’t for you, then you have other options instead. But, if marriage is something that you would like to do with your partner, then you will have many financial perks, such as some of the ones we have spoken about above.
What we can conclude from this article is that, if you aren’t married but are living with your partner, it is important to make some considerations regarding your finances. These include setting up a cohabiting agreement and making a will which exactly states your intentions for your estate, so that you don’t get caught out in the event you split, or one of you passes away.
What financial considerations have you and your partner made whilst cohabiting? Leave a comment below.
Please be advised that this article is for general informational purposes only, and should not be used as a substitute for advice from a trained financial professional. Be sure to consult a financial professional or adviser if you’re seeking advice regarding your finances and property rights. We are not liable for risks or issues associated with using or acting upon the information on this site.
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