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The financial risks of not getting married

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Written by: Emma Lunn
11/08/2021
The marriage rate is at a record low, according to the Office for National Statistics (ONS).

The government body has published marriage statistics for 2018. These show that the marriage rate of opposite sex couples was the lowest on record in 2018, with 20.1 per 1,000 unmarried men and 18.6 per 1,000 unmarried women. There were 234,795 marriages in 2018 – down 3.3% from 2017.

Since 1972, the annual number of opposite-sex marriages has fallen 46.5%. Meanwhile the average age to get married is rising. In opposite-sex couples, men married at an average age of 38.1, and women 35.8.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “Marriages hit a record low in 2018, as more people decided it was better to live with their partner first for a few years than live with a bad decision forever. But as more couples move in together for longer without tying the knot, they need to understand the ways it can make them vulnerable.

“There are all sorts of reasons why people choose to marry or live together, and nobody would suggest marrying for money. However, if you are living together you need to understand the financial risks you face. You could be in for a horrible surprise if you split up, or fall foul of rules you never knew existed if your partner was to die.”

The risks of living together

Dying intestate

If one of you dies without a will, the other could get nothing. If the home is in their name, you could lose your home too, because everything passes to your partner’s family – children first and then their parents.

The only way to ensure an unmarried partner inherits is to draw up a will so that your assets are left exactly as you want them.

Pensions

If you have a pension which is meant to pay out to a spouse when you die, some pensions don’t allow this to be left to an unmarried partner.

Some pensions allow you to complete a ‘nomination of beneficiaries’ form, to ask for anything to pass to your partner, but if you don’t complete the form there are no guarantees that this will happen.

Parental rights

If you have children and the father isn’t on the birth certificate and the mother dies, the father doesn’t automatically have a right to care for the child.

Fathers can protect themselves by being there when the birth is registered, and being on the birth certificate.

Inheritance tax

If one of you dies and leaves everything to the other, in a marriage or civil partnership this would all be free of inheritance tax. But if you’re not married and you breach the inheritance tax nil rate band (£325,000), there could be tax to pay. In some cases, this could mean you can’t afford to stay in your home.

Passing on ISAs

There are no inheritable ISAs. If your spouse holds an ISA on death, you will get an additional ISA allowance – called an Additional Permitted Subscription, which means ISA assets they leave you can all be wrapped up in an ISA again without affecting your allowances. But if you’re not married, you don’t get this extra ISA allowance.

Property rights

If you split up and one of you owns the house in their name, the other may have no right to live in it or to a share of the property.

However, financial contributions can be reflected by switching to own the property as tenants in common which allows each partner’s financial contribution to be reflected in the proportions of ownership.

No spousal maintenance

If you split up, and one partner has sacrificed their career to look after children, they have no right to spousal maintenance. On average, women’s pay falls 7% for each child they have – so without maintenance to make up the difference, this could leave them thousands of pounds worse off each year.

Pensions

In the event of a split, if one of you has a sizeable pension and the other has nothing, there’s no obligation to share retirement savings.

Tax disadvantages

Everyone has a personal allowance that’s not subject to income tax, a personal savings allowance, a dividend allowance and a capital gains tax allowance. Married couples can share assets between them to take advantage of both people’s allowances. But if unmarried couples try to do this, sharing the assets could trigger a tax bill.

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