Four cohabitations and a funeral: Beyond the common law myth

The witty exchange between Charles and Carrie in the film Four Weddings and a Funeral might make us smile, but for many couples who choose not to marry, the ending is far from romantic. In the UK, cohabiting couples are the fastest-growing family type. Yet most remain unaware that their legal and financial rights differ dramatically from those of married couples or civil partners.

The persistent myth of the “common law marriage” is just that, a myth. No matter how long you live together, you do not acquire the same rights as a spouse. This misunderstanding can lead to devastating consequences when life throws the unexpected at us.

The tax-related risks

One of the biggest financial shocks for unmarried couples is Inheritance Tax (IHT). Married couples and civil partners can transfer assets to each other at death tax-free. Cohabiting couples cannot. If one partner dies, the surviving partner could face a 40% tax bill on the family home, potentially forcing a sale at the worst possible time.

Gifting between unmarried partners is also less tax-efficient. While spouses enjoy exemptions for IHT and Capital Gains Tax (CGT), cohabiting couples do not. This means even well-intentioned financial planning can trigger unnecessary tax liabilities.  Life insurance and careful estate planning can help mitigate these risks, but only if you act early.

Wills, don’t leave it to chance

Unmarried partners also do not automatically inherit from each other. Without a valid will, your estate could pass to parents, siblings, or distant relatives, leaving your partner with nothing. Even if your children inherited, restrictions on accessing funds for minors can make life extremely difficult for the surviving partner.

A will can be tailored to your circumstances, for example, making gifts conditional on the relationship continuing or placing assets in trust. And if marriage is on the horizon, a will can be drafted “in contemplation of marriage” so it remains valid after the wedding.

Property, who owns what?

Property ownership is another complex area. Contributions to deposits, mortgage payments, and renovations often vary between partners. Without a clear agreement, disputes can arise, not just between the couple, but with family members or HMRC after a death.

A cohabitation agreement or declaration of trust can clarify ownership and protect the interests of both parties. These agreements can also extend to other joint ventures, such as businesses.

Planning for incapacity

Death isn’t the only risk. An illness or accident can leave one partner unable to manage their affairs. Without the right documents, such as a Lasting Power of Attorney, the other partner may struggle to pay bills, manage investments, or arrange care. For unmarried couples, this challenge is even greater

Love may be priceless, but failing to plan can be costly. Cohabiting couples need to take proactive steps, wills, insurance, property agreements, and powers of attorney, to protect themselves and their families.

If you’re living together without being married, don’t leave your future to chance. Contact our Private Wealth team for expert advice on protecting your assets and your loved ones.