Financial rights when cohabiting

The number of couples cohabiting without tying the knot has risen by 22% in the last decade, while the number of married couples rose by just 3.7%. Although living together means sharing the cost of living, unless couples are married, they have few – if any – financial rights if they break up or one person dies.

For example, you won’t be able to access your partner’s bank account if they die and if you break up and move out, you don’t have rights over a car or home that’s in their name, even if you helped pay for them.

Couples can have a cohabitation agreement drawn up with a solicitor to outline what happens to property, assets and children if they separate or one person dies. You can create a cohabitation agreement at any time.

It’s also wise to create or update your will, specifying your wish that your assets pass to your partner if you die. Without a will, a person’s assets go to their next of kin and for unmarried people this could be a blood relation rather than their partner.

Financial rights when married

There are some advantages to being married or in a civil partnership, financially-speaking. For example, the law treats money and property in one spouse’s name as belonging to the other, so if one person dies the investments, savings in ISAs and bank accounts in their name automatically pass to a spouse or civil partner.

A person’s private and workplace pensions may also pass to their surviving spouse, depending on the specific pension scheme. Check with each of your pensions that the ‘named beneficiary’ is your partner.

The Marriage Allowance

The Marriage Allowance is a tax perk that some spouses and civil partners can use to reduce the amount of income tax they pay. The lower earner can transfer up to £1,260 of their personal allowance (the amount a person can earn before paying income tax) to the other, usually the higher earner, which reduces their tax bill by up to £252.  Normally the lower earner’s income would be below the personal allowance, which is currently £12,570, to qualify for the Marriage Allowance.

Pre-nuptial agreements

Once the preserve of the super-wealthy, it’s become more common for couples to sign pre-nups before the wedding or even post-nups once married, which set out how assets such as property, savings, investments or a business would be shared if the couple divorce.

In the eyes of the law, spouses or civil partners jointly ‘own’ their finances so they are often shared equally during divorce. Bear in mind that divorce courts can override what’s laid out in a pre-nup, potentially if a long time has passed since the agreement was made, the couple’s circumstances have changed significantly or if it was unfair.

Realistically, it is only worth spending on the legal fees to create a bespoke pre-nuptial agreement if one or both people in a couple are bringing substantial assets to the marriage.

Paying for a wedding

The cheapest way to get married or become civil partners is through a ‘statutory ceremony’ at a registry office where the fee is £46 – but you often can’t have music, readings or guests other than two witnesses. This is simply having the registrar take a couple through the formalities, signing the documents and an exchange of vows – which is a legal requirement for marriage, but not civil partnerships.

Most people want family and friends around to hear them say their vows, and having a registry office ceremony with people in attendance means higher fees that can be between £200 and £700 depending on the local authority. Fees are usually cheaper mid-week and higher during the peak wedding season of May-September, so check the website of the local authority where you’re planning to marry.

It’s well known that having a wedding party with food and drinks, outfits, flowers, venue hire and professional photography does not come cheap – ranging from £18,000 to £30,000 according to estimates, although the sky’s the limit for couples with extravagant tastes.

Whether it’s five guests or 500, whatever location and aesthetic you imagine for your wedding, starting to save when you first get engaged can make the overall cost more manageable. Don’t underestimate how much small amounts saved regularly can add up – you never know what that £50 might help pay for at the wedding, so if you can afford to, put it away in a dedicated savings account. Easy access savings accounts currently pay up to 4.35% AER interest according to Moneyfacts.

Investing for a wedding

Some people know they want a big wedding one day and sometimes it’s parents who hope their son or daughter will tie the knot in style. If the wedding is at least five years away, investing could potentially help you reach a financial goal more quickly than relying on interest from cash savings.

However, investing comes with risk of financial loss, and there will inevitably be ups and downs, so only invest money you won’t need for five years or more. You can invest small amounts regularly or put a lump sum into a diversified portfolio with relatively low fees. Using an ISA may help too, as there is no tax to pay on interest or investment returns made on the money held in these accounts.

No-fault divorce

Break-ups are never easy but England’s 50-year old divorce law made ending a marriage more unpleasant than it had to be, according to the legal professionals who campaigned for reform.

Messy, protracted legal battles should be a thing of the past since in April 2022 a new system of divorce law was introduced. Couples no longer have to prove that one person is at fault for the marriage breaking down – which is called ‘no-fault divorce’ – and can jointly file for divorce. The right to contest a divorce has been removed, and the divorce process can be completed online.

There’s always a financial aspect to being in a long-term relationship, whether you’re cohabiting, engaged, married or in a civil partnership. Understanding the legal side of money and relationships can make everything run more smoothly, while you’re together, planning a wedding, and even if the unexpected happens.

Annabelle Williams is personal finance specialist at Nutmeg