As attitudes towards relationships change, it’s becoming more common for couples to live together and start a family before getting married. In fact, according to the Office for National Statistics (ONS), cohabiting couples made up 17.6% of all families in the UK in 2023, up from 15.9% a decade earlier.

However, the law hasn’t caught up with the changing trends and unmarried couples don’t always have the same legal protections as couples who are married or in a civil partnership. If you and your partner are cohabiting, this could cause some financial challenges now and in the future.

While you might not want to consider what would happen if the relationship ended, one of you became ill, or even passed away, it’s important to make sure that your assets are protected.

Read on to learn five tips that could help.

1. Have open conversations about your wealth now

Having open conversations with your partner about your wealth is crucial for several reasons. It helps you develop shared goals, so you can plan together. You may also find it useful to understand one another’s financial mindset and priorities.

Ultimately, being open about your finances from the beginning means you’re on the same page and can work together to build wealth effectively, leaving you both in a stronger position.

You may also want to discuss how you will manage your wealth in the event of a break-up too. It’s tempting to avoid this topic but if the relationship does end and you haven’t made any plans, it could be harder to divide your shared assets in a way that satisfies you both.

By having these conversations now, you may be better equipped to build and protect your wealth whatever happens.

2. Write or update your will

Couples who are married or in a civil partnership enjoy certain advantages that cohabiting couples don’t when it comes to estate planning.

If you pass away without a will, your estate is normally divided according to the rules of intestacy. Under these rules, a spouse or civil partner typically inherits a large portion of the estate, with the rest going to children, if there are any.

However, if you’re not married or in a civil partnership, your estate will likely pass to children, if you have any, or other family members such as parents or siblings. Your long-term partner won’t automatically inherit anything from your estate, regardless of how long you’ve been together or whether you’re cohabiting.

As such, it’s vital that you both put a will in place and outline your wishes if you want one another to inherit your wealth and belongings.

3. Create a Lasting Power of Attorney

When writing your will, you may want to consider creating a Lasting Power of Attorney (LPA) too. This document allows you to name one or more “attorneys” – trusted friends, professionals, or family members – to manage your affairs if you’re not capable of doing so yourself.

There are two types of LPA to consider:

• Health and welfare – Nominates somebody to make crucial decisions about your medical care and overall wellbeing, including your living situation.
• Property and financial affairs – Nominates somebody to look after your finances and property. Your chosen attorney (or attorneys) have access to bank accounts, pensions, and investments.

If you were to fall ill or be seriously injured and didn’t have an LPA, your partner wouldn’t be able to access any of your finances. This could cause problems if, for instance, your joint emergency fund was in a Cash ISA in your name or certain bills were paid from your personal account.

Where there is no LPA, your partner will need to apply to the Court of Protection to become a “deputy” before they can make decisions on your behalf. As a long-term partner has no legal rights as a relative or next of kin, it may be more difficult for them to attain the necessary permissions.

Putting an LPA in place now and naming your partner as your attorney could help you prevent these problems and ensure you’re both protected in a difficult situation.

4. Decide on the most suitable way to own joint property

Your home is often your biggest asset, and it’s important to consider how you own any joint property if you’re not married.

There are two main options to consider:

• Joint tenants – Each person has an equal stake in the property. If your partner passes away, you automatically inherit their share of the property, and vice versa.
• Tenants in common – Each person owns a distinct share of the property, and they don’t necessarily have to be equal. You can leave your own share to whoever you choose when writing your will.

It’s important to consider your situation and which of these options is most suitable for you. For instance, if one partner makes a bigger financial contribution to the property, you may opt to be tenants in common. In the event of a separation, you could sell the property, and each person would receive a share equal to their original contribution. Alternatively, one person could buy out the other.

Conversely, if you’re contributing an equal share, being joint tenants could make estate planning simpler as the property immediately passes to the other person if one of you dies. If you separate, the property can be sold, and the proceeds split evenly.

5. Consider a cohabitation agreement

A cohabitation agreement is a legal document that sets out the financial responsibilities and assets of two parties who are living together, whether they’re in a romantic relationship or not.

The agreement may cover:

• The ownership of assets including those acquired during the relationship
• The financial responsibilities of each person including how you will divide bills and living expenses
• How you will navigate a separation, including the division of shared assets.

Putting a cohabitation agreement in place now could make negotiations smoother in the event of a separation. It also means that both parties are more likely to receive a share of assets equal to their financial contribution to the relationship.

Get in touch

If you need guidance on managing your finances as a cohabiting couple, we can help you protect your assets and plan a prosperous future together.

Please contact us at hello@ardentuk.com or call or WhatsApp us on 01904 655 330. As an award-winning financial advice company with advisers included in the 2024 VouchedFor Top Rated guide, you can be sure that we’re a bona fide company providing excellent advice and high-quality service.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The Financial Conduct Authority does not regulate estate planning, Lasting Powers of Attorney, or will writing.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.