Unmarried couples … the do’s and don’ts


Getting married isn’t necessarily high on everyone’s list of priorities, but just cohabiting can have a major impact on your Tax and Estate Planning arrangements.

Contrary to popular belief, it doesn’t matter how long you have been together or how long you intend to remain together; the benefits attributed to married couples are not available to those who cohabit or are in long-term relationships.

The first thing to mention is that if you aren’t married to your partner but your Will leaves them everything when you die, there will be a tax payment due on anything over the Nil Rate Band (NRB) allowance of £325,000 – there is no spousal exemption!

This means Inheritance Tax will be payable on the first death, and potentially also on the second death on the same assets, and this will no doubt be at an increased amount because the Estate of the second to die will also have its own assets as well as those from their deceased partner! Add to that, the deceased partner will lose any Residential Nil Rate Band (RNRB) they may have had because they aren’t leaving their property to their bloodline descendants.

Therefore, by not being married, you will potentially pay significantly more tax than a married couple in the same situation.

One solution to this would be to get married! Simple yet effective, but understandably not for everyone. So, another solution would be Trust Arrangements. Trust Arrangements are the most effective way to protect Inheritances, prevent liability for Inheritance Tax and make sure all allowances, e.g. RNRB, can be utilised.

Although no one likes to think about it, after the death of a partner, those left behind can move on to new relationships and family scenarios; as well as saving tax, the protection element of a Trust that ensures your assets reach your intended beneficiary, e.g. your children, is invaluable. Any costs incurred by Trust Arrangements are heavily outweighed by the potential tax savings and other benefits they provide.

A quick win for you would be to make sure that your life cover is in Trust, as this will mitigate tax on the first and second death as well as provide protection. In addition, always make sure that pensions have a nomination of beneficiary or Trust Arrangement attached to ensure they reach your intended beneficiaries.

If this situation applies to you or to a member of your family, then the persons involved should, at a minimum, review their Wills to ensure they aren’t creating an unnecessary tax liability. Please get in touch to see how we can help.

Redwood is one of the South’s leading Pensions, Investments, Wills, Trusts & Estate Planning providers, and we are dedicated to helping families to grow, protect and enjoy their wealth. With our unrivalled knowledge of Estate Planning and Probate, we can advise on any situation. Join us at one of our Free Public Information Webinars: Book online Book Me A Place!Call us on 01489877 547 or Email info@redwoodfinancial.co.uk to book a no-obligation Initial Meeting with us to review your financial planning needs.

Jasmine Lambert Chartered Financial Planner
Jasmine Lambert

Jasmine is the Managing Director and a Chartered Senior Financial Planner at Redwood Financial. She helps clients manage and grow their wealth and protect their estate. Jasmine also provides expert advice in our FREE Redwood Webinars, where you can learn more about Wills, Trusts and Estate Planning.

Redwood Financial is one of the south’s leading Investments, Pensions, Wills, Trusts & Estate Planning providers and we are dedicated to helping families to grow, protect and enjoy their wealth. With our unrivalled knowledge of Estate Planning, Lasting Powers of Attorney, Probate, Pensions, Savings & Investments, we can advise on any situation.
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