How to manage your money as a cohabiting couple

  • Insight

13 June 2016

Plan early

We often assume that we do not need to give much thought to our financial or testamentary affairs until much later on in life. The reality is that young cohabiting couples are most likely to be caught out by poor financial and legal planning.  It is important to discuss these issues and put the necessary arrangements in place to ensure that both you and your partner are protected should the unthinkable happen.

State who your pension should go to

It can be difficult discussing death, especially if it seems like a distant prospect, but cohabiting couples need to be prepared. This is because, unlike spouses, unmarried partners do not generally fall into the category of kin that Pension Trustees will considering paying death benefits to. To ensure that, should anything happen to you, your cohabitant may receive a share of your pension, you must complete a pension death benefits nomination form.  Pension Trustees are then obliged to take your wishes into consideration when they look to distribute your benefits although may not follow them to the letter.

Update your life assurance policy

Make sure your policy is set up to pay out to your cohabitant, otherwise it is unlikely they will receive any benefit if the policy pays out in the event of your death. This is very important if you have a joint mortgage and in the event of a death, the surviving partner would be unable to make the payments on his or her own. As beneficiary of your life assurance, they will be able to use the funds towards the mortgage and can continue to live in the property should they so wish. If you don’t have a joint mortgage, this will help them with funeral and additional legal costs and help to maintain their lifestyle.

Plan carefully when buying property

The sad fact is not every relationship survives long-term. Married couples with a joint mortgage have automatic legal provisions in place which will allow their matrimonial home to be sold or transferred to a sole individual should the relationship break down. A separated cohabitant can only insist on the sale of the property in court. Partners buying a property together may opt to enter into a Minute of Agreement detailing what will happen to the property should the relationship end.

Make a Will

Under Scots law, a cohabitant may apply to the court for an award from their deceased partner’s estate if they died without leaving a will. However, if the deceased had been previously married, and were not yet divorced at the time of death, their spouse would be legally entitled to a share of the estate. It’s important that you state precisely how you would like your assets to be divided, and to whom they should be given. Keep an up to date Will to ensure your partner receives exactly what you would like them to.

This article originally appeared in The Scotsman on 10 June 2016.