Many people don't realise that unmarried couples are not recognised in law. This means that, if you are in a long-term relationship but not husband and wife or civil partners, you have to plan your financial affairs more carefully than those who are married or in a civil partnership.
The major problem is what happens when one of you dies. Under the laws of intestacy, an unmarried partner is entitled to jointly owned assets only. If the couple have children, the estate of the deceased will pass to them when they are 18. If there are no children, the estate will pass to the deceased's closest relatives - parents, brothers, sisters etc. etc. - but never to the surviving partner.
What are the rules of intestacy
When a person dies without leaving a valid will, their property (the estate) must be shared out according to certain rules. These are called the rules of intestacy. A person who dies without leaving a will is called an intestate person.
Only married or civil partners and some other close relatives can inherit under the rules of intestacy.
Married partners or civil partners inherit under the rules of intestacy only if they are actually married or in a civil partnership at the time of death. So if you are divorced or if your civil partnership has been legally ended, you can’t inherit under the rules of intestacy. But partners who separated informally can still inherit under the rules of intestacy.
If there are surviving children, grandchildren or great grandchildren of the person who died and the estate is valued at more than £250,000, the partner will inherit:
If you have any life insurance plans to cover your mortgage, make sure that these are in trust for your partner. If you have children you should look at extra family insurance cover and these also can be written in trust for your partner and the children.
Life insurance premium rates have reduced significantly in recent years and the critical illnesses covered have increased. If you have existing plans, it is worth finding out if the same cover is now cheaper or better. This can be the case if you have stopped smoking - smoker rates for life insurance can be up to 50% higher than the equivalent non-smoker rates. Costs are now the same for male and females so men might find the cost of a replacement plan is now cheaper. You should never cancel any existing plans before making sure that a suitable replacement is in force.
It is vital that unmarried couples make a will, not least to ensure that your property and assets pass to the people who you wish to benefit on your death. As well as dealing with the disposal of your property, you can also use your will to indicate who should be guardian of your children on your death.
Inheritance tax (IHT) is a major problem for unmarried couples who own substantial assets. Where a husband, wife or civil partner can leave everything to their legal partner without the estate paying a penny of tax, anything left to an unmarried partner over and above the 'nil rate band' - currently £325,000 per person is taxed at 40%. source - http://www.hmrc.gov.uk/rates/iht-thresholds.htm
Speak to the team at Best Financial Planning today for your review 01865 361191