Marriage, once a staple social institution, is largely in decline. For those who choose to cohabit long-term with their partners, this creates tax and inheritance implications.

The number of unmarried cohabiting couples has risen considerably in the 21st Century. Between 2002 and 2020 (the most recent numbers available) unmarried cohabitation rose by around 78%, according to the ONS.

While in social terms, deciding against marriage or civil partnership is a perfectly normal part of modern society, it can create complications for those couples when it comes to financial planning, inheritance and taxes.

The purpose of this article is to explore those issues, and not make a judgement about the social choices!

Before going any further, it is important to clarify a common misconception. For legal purposes, there is no such thing as a “common law partner.” It is a very commonly held misconception about cohabitation. This extends to the point where some companies will allow you to pick “common law partner” when filling out forms. But it simply does not exist as a legal concept.

That being said, here are some primary things to think about if you are in a long-term cohabiting couple, and are concerned about the implications for your joint finances in the event a partner passes away.


Perhaps not considered in the same vein as broader inheritance, there is a basic legal issue which arises for couples that cohabit but are unmarried or civil partnered.

Many couples choose to do their banking through joint accounts, but others may choose to keep things separate. This can create a significant issue if one were to die, as the other would have no right of access to their accounts, and therefore money.

Such a situation can create ancillary headaches with issues such as how household bills, mortgage or rent payments get made. This can be rectified with some admin work, but bigger issues can arise if one partner held cash that the other then needs to access so that they don’t fall behind on those bills.


Property ownership can be clear cut, but only if it is arranged correctly when purchased. If one partner owns a property in their name alone, the surviving partner has no clear right of ownership or habitation if the owner dies.

While broadly it falls under inheritance rules and will be governed by a document such as a Will, there is an easy way to protect against the problem, by making changes to the paperwork to incorporate both partners into ownership – either as joint owners or owners in common.

Common ownership can be a more practical solution, were the couple to split up, as essentially, they both own an agreed share of the asset. Joint ownership can be more complicated, because it means both parties share ownership of 100% of the asset.

Inheritance Tax

While the financial perks of marriage are fairly limited these days, there is one major benefit to being legally attached to your partner.

Inheritance rules make clear that married, or civil partnered spouses, enjoy far more protection and allowance against IHT than unmarried couples.

Everyone has an IHT allowance of £325,000-worth of assets. This is called the Nil Rate Band (NRB). IHT is payable at 40% of any assets above this level.

The Residential Nil Rate Band (RNRB) adds an extra £175,000 on top of the NRB when exclusively accounting for the value of the person’s main home. However, the rules are that in order to use this allowance, the person who died must have left their home, or a share of it, to their direct descendants.

For a married couple there is a spousal exemption when one of the partners dies. All the assets held by one can be transferred tax free to the other. Then, when the final partner dies, the entire sum of both people’s NRB and RNRB are combined to give a final allowance. This is potentially worth £1 million when taken in total.

Alternatively, for an unmarried couple, were one to die, the other would be liable for IHT on any assets they inherit worth above the other partner’s combined IHT exemption. Worse, the IHT will be payable before the assets can be transferred, potentially leaving the surviving partner with a hefty tax bill – one which they may have to sell their home to pay.

Finally, when the surviving partner dies, IHT is due again for anything over their personal allowances. This means those assets will potentially be taxed twice if their value still exceeds the allowances.

How to mitigate the issue of unmarried IHT?

It would be easy to suggest getting married or civil partnered would be the clear and easy way to mitigate the issues mentioned above. Ultimately this is true as at a stroke it takes away the issue of allowances, and gives special right of ownership and access to banking and property.

But in legal and social terms it may not be quite so easy, and that is understandable.

Having a Lasting Power of Attorney (LPA) and a Last Will and Testament (Will) in place is a great starting point. This will provide clarity on a partner’s inheritance, and their ability to access important resources such as bank accounts in the event of the other’s death.

Even if an unmarried couple has lived together for 50 years, without key documents such as Wills, there is no certainty that they will be the beneficiary of an inheritance. If someone dies intestate, inheritance of their property typically reverts to the nearest blood relative (next of kin), generally a child.

But there are also ways to structure wealth that can mitigate some of the issues, without resorting to tying the knot. If you would like to discuss this issue further don’t hesitate to get in touch with your financial adviser.