In recent decades, opting to cohabit without tying the knot has surged in popularity, with the number of unmarried couples doubling to 3.3 million between 1997 and 2017 (ONS November 2017). Yet, despite the emotional and non-financial reasons for bypassing legal marriage, it's crucial for cohabiting couples to recognise that they may face financial setbacks compared to their married counterparts.
While the tax landscape may be more favourable for spouses and civil partners, unmarried couples can implement strategic measures such as setting up trusts or structuring property ownership as tenants in common to optimise their tax planning strategies.
For further information on any of the topics discussed in this article, please don't hesitate to contact Kat on 01733 308666 or via email at kat.chiva@haverfords.co.uk.
- Securing Financial Well-being: As partners sharing a life together, it's essential to grasp that without a will, the surviving partner won't automatically inherit anything from the estate if one passes away. This highlights the critical importance of drafting wills to ensure that your partner is financially supported after you're no longer around.
- Navigating Property Ownership: In instances where a cohabiting couple doesn't have children, they won't benefit from the residence nil rate band. This underscores the need for cohabiting partners who own a home together as tenants in common to consider leaving their share of the property to a life interest trust. This arrangement protects the surviving partner's right to remain in the property while enabling the deceased partner to retain control over the eventual destination of their share of the property.
- Understanding Tax Implications: Unlike married couples who enjoy the spousal exemption, which allows for the tax-free transfer of assets between spouses or civil partners, unmarried partners face potential tax liabilities on inherited assets. This underscores the importance of proactive tax planning for unmarried couples to mitigate any tax burdens that may arise.
- Leveraging Available Tax Benefits: Despite the tax advantages favouring spouses and civil partners, unmarried couples can still access certain tax benefits, including the Nil Rate Band (NRB) and the Residence Nil Rate Band (RNRB). These allowances provide opportunities for tax-efficient wealth transfer, allowing unmarried couples to safeguard their financial interests.
While the tax landscape may be more favourable for spouses and civil partners, unmarried couples can implement strategic measures such as setting up trusts or structuring property ownership as tenants in common to optimise their tax planning strategies.
For further information on any of the topics discussed in this article, please don't hesitate to contact Kat on 01733 308666 or via email at kat.chiva@haverfords.co.uk.
