Wills for unmarried couples

It is vital that couples living together plan how they intend to own their property and make a will to ensure that each other’s financial security is provided for. At the same time, you can ensure that, for example, guardians have been appointed for any children you have and any other arrangements you want to make.  

Inheritance tax is a tax on the assets of someone who has died but the rules are different for married couples and those in a civil partnership than for those who live together. Where assets exceed a value of £325,000, inheritance tax is paid at 40% on anything above that threshold. The £325,000 is called the nil rate band and everyone has this allowance.  

While the nil rate band is transferable between spouses (meaning the surviving spouse has a total potential nil rate band allowance available to them of £650,000), it cannot be transferred between partners who live together. Cohabiting couples can therefore end up paying much more tax than a married couple if they do not have a will in place and have given thought to some sensible tax planning.  

The government also introduced a new inheritance allowance known as the ‘residence nil rate band’ that came into force on 6 April 2017. This allowance applies in addition to the nil rate band allowance but is conditional upon the main family home (or a share of it) being passed on to children and grandchildren.  

The residence nil rate band is also transferable between spouses so if it isn’t used on the death of the first spouse, the survivor will have two allowances on their death. However, this does not apply to cohabiting couples. 

If you and your partner own your home as “joint tenants”, your share in the property will automatically pass to your partner on your death, regardless of any other instructions you put in a will. However, if the property is owned as ‘tenants in common’ your share will pass under your will or under the intestacy rules if you do not have a valid will. 

For couples living together, it is crucial that you have a valid will if you hold your assets as tenants in common.  

If you did not have a will and the intestacy rules apply, your share of the asset would pass as part of your estate to your next of kin (usually a child, parent or sibling). 

Unless you have a will in place, your assets may not pass to your partner. The only assets which will pass to your partner are those you hold together as joint tenants. This can include bank accounts and investments as well as a house.  

When someone dies without having made a valid will, the intestacy rules apply. The rules are different depending on whether there is a surviving spouse or civil partner.  

Crucially, if you are living with your partner but are not married or not in a civil partnership with them, and your partner dies intestate, you have no automatic entitlement to their estate under the intestacy rules.  

If you and your partner lived together, and they die intestate, you may be able to make a claim under the Inheritance (Provision for Family and Dependant) Act 1975 for “reasonable financial provision” from their estate. However, the burden would be on you to make the case for reasonable financial provision, which is likely to be less generous than the financial provision that would be made for a surviving spouse.  

If you are divorced or have had your civil partnership dissolved, your ex cannot inherit under the intestacy rules.  

Pension arrangements and life assurance arrangements should be reviewed carefully so that you know who may benefit under them in the event of your death. You can then take the appropriate action to ensure that the people you want to benefit do benefit.  

You should review your pension arrangements carefully to understand what benefits are payable on your death and to whom they may be paid. For example, not all pension schemes provide for a pension to be payable on your death to anyone other than your spouse or civil partner. If they do provide for a pension to be payable to a cohabiting partner there may be conditions that have to be met. 

Many employers offer a death in service benefit to their employees, either under their occupational pension scheme or under a standalone life assurance scheme.  Where your employer offers this, it is important that you complete, and keep up to date, an “Expression of Wish” form to indicate your chosen beneficiary. The range of beneficiaries of the lump sum death benefit is normally very wide and usually includes a cohabiting partner (but always check this).