Keeping wealth in the family: Advice for cohabiting couples

A lot of people still assume that living together gives you similar rights to being married, often under the idea of a ‘common law marriage’. In reality, the position is very different. In England and Wales, cohabitants have no legal status and therefore no automatic rights in most situations, especially if the relationship comes to an end. If one partner dies, for example, the other has no automatic right to inherit part of their estate, no matter how long they’ve lived together or whether they have children. There is also no inheritance tax exemption on death and no legal duty to support the surviving partner financially.

Some of this could change over time through the consultation, “A fairer end to relationships”, which is seeking views on proposals to modernise the law around cohabitants, intestacy and access to financial provision from a deceased partner’s estate, among other issues.

For now, though, it’s a good reminder to check that your will has been reviewed recently and still reflects what you want.

Planning what happens to your money and possessions when you die is really about three things:

• make sure your money goes to the people you want it to go to
• reduce or even eliminate inheritance tax to leave more to those you love
• ensure that your wishes are carried out without unnecessary expense or delay

It sounds simple enough, but deciding how your money and possessions should pass on after your death can quickly become complicated. There are legal and financial pitfalls along the way, which is why it makes sense to start planning as early as you can.

Did you know that if you don’t have a will, your estate will be shared according to set rules that may be very different from what you would have wanted?

With the 2021 census showing that almost one in four couples living together are cohabiting rather than married or in a civil partnership, that can lead to consequences many people simply don’t expect.

The effect on the people you leave behind can be profound. If you already have a will, it’s worth reviewing it regularly to make sure it still does what you want it to do. Changes in family circumstances, inheritance tax rules or wider legislation can all affect whether it remains fit for purpose.

Sometimes people assume that having a will means they don’t need a Lasting Power of Attorney, but the two do very different jobs. A Lasting Power of Attorney lets you appoint someone you trust to make financial and/or medical decisions for you if you’re unable to do so yourself, for example, if you become ill. It can help to think of a will as something that supports your loved ones after your death, while a Lasting Power of Attorney is there to protect you while you’re still living.

It’s a slightly odd quirk, but your will does not decide who inherits your pension. When you set up a pension, you will usually complete a nomination of beneficiary form, and the people named on that form will normally be the ones considered when benefits are paid on death. Over time, it’s easy to forget who you nominated, and those choices can quickly become out of date if your circumstances change. If you’re unsure, your Old Mill Financial Planner can help you check.

This is often the step people forget. It’s important to have these documents in place and keep them up to date, but it’s just as important that your loved ones know where they are and how to access them when the time comes. Telling them in advance that you’ve done this planning can make things much easier during what may already be a very difficult time.

You may also want to talk to your family about what you’re trying to achieve and why, without needing to go into exact figures. That can help them understand your intentions and may reduce the risk of misunderstandings later on. They may also have useful views about how your estate should be managed. Quite often, it’s not the money itself but small items with sentimental value that cause the most upset if they’re overlooked or end up with the wrong person.

Old Mill works with many families across generations. Over the last couple of years, we’ve seen more clients helping younger family members as first Covid and then the cost of living crisis put pressure on household finances.

On the surface, gifting can sound straightforward. In practice, though, it can carry real risks if it’s done without expert financial advice, especially where timing, purpose and sequencing need to fit into a wider financial plan.

More families are now sharing advisers to help plan and manage wealth transfer. If we can help your family with that, please speak to your usual Financial Planner.

If you have any questions or would like to discuss your individual circumstances with an Old Mill financial expert, please do get in touch.