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If you live with your partner, but aren’t married or in a civil partnership, you’re in the fastest growing household type, according to government figures.
Around one-in-five households is now shared by a cohabiting couple. And it’s not just younger folk who are doing this. About one-in-ten people aged between 45 and 59 are now choosing to live in this way.
From a legal perspective, co-habiting differs noticeably compared with, say, being married. But with rule changes afoot potentially, the co-habiting landscape could be set to change. From a financial viewpoint, here’s what you currently need to bear in mind about cohabiting.
What’s on this page?
The government recently launched a consultation exploring ways to increase protections for 3.5 million co-habiting couples.
Under the proposals, eligible cohabiting couples would be able to apply for new legal protections when a relationship ended. The plans also make provision for giving unmarried couples an automatic right to an inheritance when their partner dies without making a will.
If - or when - the laws are modernised, the current task of juggling finances and ensuring your partner is protected when you die can be complicated when you’re not legally bound.
With that in mind, here’s what to think about if you’ve not tied the knot - whether you’ve just set up home or have been cohabiting for years.
Lucie Spencer, financial planning partner at Evelyn Partners, says when you start living together, particularly later in life, it’s essential to have an open and honest conversation about money. She recommends couples ask questions of each other.
“What do you want your finances to achieve? What does your ideal future look like? If you love each other enough to share a home, then you should feel comfortable discussing your financial priorities too,” she points out.
Bernard Rust, financial planner at Shackleton Advisers, adds that this means thinking about personal and joint goals. “People have their own smaller goals, things like saving for a new car, golf clubs, or a guitar in my case. Then there are the larger joint goals like paying off the mortgage off, big holidays, or retirement.”
But when it comes to the best way to manage your finances, Rust says there are no hard and fast rules.
“I see all sorts of arrangements. Some couples share everything, while others keep almost everything separate. I even have married clients who insist on separate fact‑find meetings and who have entirely separate finances.
“But for most people, whether married or cohabiting, it’s about finding a balance that feels fair.”
You’ll also need to discuss what you want your retirement to look like, as you should if you’re married, too.
Lucie Spencer points out you could both have a very different vision of your future. “Retirement can mean different things to different people, so understanding each other’s expectations early on is key. If one person wants to travel the world, but the other wants to stay at home and look after the garden, then this needs to be discussed.”
It’s also important to think about how you’ll manage your retirement income; an issue that could be more complicated if it’s a new relationship, or you don’t have a full understanding of each other’s finances.
Spencer adds: “Open conversations about pensions, savings and expected income in retirement help create a clear picture of what’s achievable.
“If one partner has a significantly greater pension provision than the other, it’s essential to discuss how that will work in practice. Setting expectations in advance avoids potential misunderstandings or resentment later.”
Richard Shaw, legal director and family law specialist at Irwin Mitchell, says his firm is dealing with increasing numbers of over-50s who have decided to cohabit rather than marry. “In some cases, people do not agree with the religious or cultural connotations of marriage; for others, it has been on the cards for years, but they have never quite got there.
“I’ve also had some clients where, sadly, their spouse has died, and they do not wish to remarry but are in a new relationship. For many, though, it is a case of once bitten twice shy. Getting married is an expensive business, but getting divorced can be even more costly.”
Whatever your views on marriage, it’s undisputed that married couples currently have better legal protections and financial rights.
For example, under current legislation, if you die without a will, your partner will only automatically be entitled to an inheritance, if you’re married. And if you split up, there’s no protection if you’re simply cohabiting.
Bernard Rust says: “From a tax point of view, it’s better to be married. You can transfer assets freely, share allowances, and make use of the spousal exemptions.”
This can be particularly valuable when it comes to inheritance tax. Even if you’ve written a will that ensures your partner inherits when you die, they could face a hefty bill, if you aren’t married.
“I know couples who’ve been together for years and then married because it made financial sense,” Rust adds.
Another option, if you don’t want a ‘traditional’ marriage, is a civil partnership, which grants the same rights.
Laura Colville, a private client specialist at Irwin Mitchell, says this option offers a more understated and modern way to formalise a relationship. “We’re seeing increasing interest in civil partnerships among older couples, particularly those who want the legal and tax advantages of marriage, but not the cultural or religious connotations.
“In later life, the decision is often pragmatic: securing tax efficiencies, protecting each other’s estates, and ensuring clarity for children and blended families.”
If you don’t want to get married or enter a civil partnership, it’s important to protect your relationship, wherever you can.
A properly drafted will is a good starting point; this can be used to ensure both your partner and any children (including those from previous relationships) are looked after when you die.
Bernard Rust explains: “Will trusts are especially important for cohabiting couples with children from previous relationships. My own arrangement is that my half of the property goes to my children, but my partner can live here for the rest of her life, rent‑free.”
It’s also sensible to arrange lasting power of attorney for each other. This will let them step in to manage your finances or make decisions about your health, if you lose capacity.
He adds: “For cohabiting couples, they’re essential, because there isn’t that automatic assumption that your partner can step in and help manage your affairs.”
Unmarried couples can also get additional protection in the event of a split with a ‘co-habitation agreement’.
Richard Shaw says: “As the law currently stands, a cohabitation agreement is the best way to provide financial protection to unmarried, cohabiting couples.
“Cohabitation agreements can be used to provide clarity as to how a property is owned and would be dealt with if the couple separate, as well as governing how they might deal with finances during the relationship and on separation.”
This substantially reduces the risk of a dispute further down the line.
But a well-drafted co-habitation agreement can also be used to assist estate planning, alongside your will.
Lucie Spencer says: “If an older couple has children from a previous relationship it can help to protect assets for them or preserve financial arrangements which were in place prior to moving in together.”
A family solicitor can draw up a cohabitation or wealth protection arrangement for you. They don’t come cheap but can provide priceless peace of mind.
Richard Shaw says: “A sensible cohabitation agreement can cost a few thousand pounds, whereas a property dispute that goes through the courts is likely to cost tens of thousands of pounds each, aside from taking 12 to 18 months, with the emotional toll that comes with this.”
The agreement will be binding, so long as it has been drafted and executed according to the correct process and signed by both partners.
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