None of us like to think of our loved ones no longer being here, but it is a sad fact of life that requires planning and consideration.
It is a common misconception that living together unmarried as ‘husband and wife’ gives you the same rights as if you were married. This is not the case, regardless of how long you have been living together or if you have children together.
WILLS
Being unmarried and without having made a will leads to many problems for your surviving partner. Apart from jointly owned assets with your partner, all of your estate will instead go to your next of kin(s) under intestacy rules. This would be firstly to your children, or to your parents if no children, and so on. Your partner would not be entitled to any of your sole assets as of right, which could cause them financial difficulties and hardship at a time when they are also mourning. Your partner may be able to make a claim on your estate but this would be expensive and stressful. The only way to ensure your partner receives anything is to make a will expressing your wishes. For married couples, however, the spouse would inherit at least part of the estate under intestacy rules.
INHERITANCE TAX
Whether you leave a will or not, being unmarried also affects the level of inheritance tax payable. There is no inheritance tax exemption available for unmarried couples and tax will even apply to jointly owned assets. The amount of tax allowance available is currently £325,000. Any amount above that figure will be liable to tax at 40%, which could amount to a sizeable sum.
In comparison, all assets passing between married couples are exempt for tax. Furthermore, when the surviving spouse subsequently passes away, the tax allowance of the first spouse may be transferred to the second, thus giving the surviving spouse an additional tax allowance of up to £650,000. This transfer is not available for couples who are not married nor in a civil partnership, thus resulting in the real possibility of double taxation.
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Whilst unmarried couples do not benefit from the same rights as married couples when it comes to inheritance, there are still potential planning opportunities available. Contact us to discuss further, or you could just tie the knot…!
