Unmarried Couples: Why Wills, LPAs and Pension Planning Matter More Than Ever

Many couples live together for years, buy a home, raise children and build their finances together without marrying or entering into a civil partnership. It is easy to assume that, in the eyes of the law, a long-term relationship offers the same protection as marriage. Unfortunately, that is not the case.

In England and Wales, there is no general legal status of “common-law marriage” that automatically gives cohabiting couples the same inheritance, tax or decision-making rights as married couples or civil partners. The length of a relationship, whether a couple have children together or whether they own a home jointly does not, by itself, create those rights.

With changes to the Inheritance Tax treatment of pensions due to take effect from 6 April 2027, it is particularly important for unmarried couples to understand how their arrangements work and whether their wishes will be protected.

Wills, Lasting Powers of Attorney, property ownership and pension nominations all have a part to play in effective planning.

1. Why unmarried couples should make a Will

One of the most important steps an unmarried couple can take is to ensure that each partner has a valid and up-to-date Will.

If someone dies without a valid Will, their estate is distributed under the intestacy rules. These rules set out who inherits according to a statutory order of priority. An unmarried partner does not automatically inherit under these rules, regardless of how long the couple have lived together.

This can have serious consequences where a couple share a home, have children or depend on each other financially.

For example, if one partner dies without a Will, the surviving partner may not inherit the deceased's share of their home or other assets. Depending on the family circumstances, the estate may pass to the deceased's children or other relatives instead.

The surviving partner could therefore face financial uncertainty at an already difficult time, potentially including difficulty remaining in the home.

A properly drafted Will allows each partner to set out who should inherit their assets, who should administer their estate and, where appropriate, who should act as guardian for minor children.

It is also important to understand how jointly owned property is held. Property owned as joint tenants will generally pass automatically to the surviving owner, whereas a share held as tenants in common will generally form part of the deceased's estate. A Will cannot override the automatic survivorship rules applying to jointly owned property held as joint tenants.

Couples should therefore review both their Wills and their property ownership arrangements to ensure that they work together.

Can an unmarried partner make a claim against an estate?

In certain circumstances, a surviving cohabitant may be able to bring a claim under the Inheritance (Provision for Family and Dependants) Act 1975. Eligibility depends on the statutory requirements, including, for a cohabiting partner, whether the couple lived together in the same household as if they were spouses or civil partners throughout the whole of the two-year period immediately before death.

A claim is not the same as an automatic entitlement to inherit. It may involve uncertainty, expense and delay, and the outcome will depend on the facts and applicable law.

Making a Will is generally a more effective way of recording your intentions and reducing the risk of avoidable disputes.

2. Inheritance Tax: the missing spouse exemption

Inheritance Tax (IHT) is another area where the difference between marriage and cohabitation can be significant.

Transfers between spouses and civil partners generally qualify for the spouse exemption, subject to the applicable statutory conditions. This usually means that assets can pass from one spouse or civil partner to the other without an immediate IHT charge.

Unmarried couples cannot claim this exemption simply because they have lived together for many years or regard themselves as life partners.

If an unmarried person leaves assets to their partner on death, the value of those assets may be subject to IHT if the estate exceeds the available allowances. The standard IHT rate is generally 40% on the taxable amount above the available threshold, although the actual calculation depends on the estate, gifts, reliefs and exemptions.

The current standard nil-rate band is £325,000. An additional residence nil-rate band of up to £175,000 may be available where the qualifying conditions are met, including conditions concerning a qualifying residence passing to direct descendants. It is not automatically available simply because a person leaves a home to an unmarried partner.

For unmarried couples, this distinction can be particularly important where the principal asset is a jointly owned property. The value of the deceased's beneficial share may be included in their estate for IHT purposes, even if the property passes automatically to the surviving joint owner.

The problem with transferable allowances

A surviving spouse or civil partner may be able to claim the unused percentage of their deceased partner's nil-rate band. Subject to the relevant conditions, this can allow a surviving spouse or civil partner to benefit from a combined standard nil-rate band of up to £650,000.

Unmarried couples cannot transfer unused nil-rate band allowances between each other.

This means that, even where an unmarried couple have similar assets and make similar arrangements to a married couple, their overall IHT position may be materially different.

Careful estate planning can help couples understand their potential exposure and consider appropriate arrangements. However, planning must reflect the couple's individual circumstances and should not assume that an exemption or allowance available to spouses will also be available to cohabiting partners.

3. Pension changes from April 2027: why couples should review their arrangements

Pensions are an increasingly important part of estate planning, and the rules are changing.

Under the government's enacted reforms, most unused pension funds are due to be brought within the scope of IHT for deaths occurring on or after 6 April 2027. Certain benefits are excluded, and the precise treatment depends on the type of pension and benefit involved.

Under the new arrangements, personal representatives will generally be responsible for reporting and paying any IHT due on relevant unused pension funds. This is a significant change for people who have previously assumed that pension benefits will always sit outside their estate for IHT purposes.

For unmarried couples, the position deserves particular attention. A surviving cohabitant does not qualify for the spouse or civil partner exemption merely because they are nominated to receive pension benefits.

Where pension funds are brought within the IHT calculation, the absence of a spouse exemption may affect the overall tax position. The outcome will depend on the value of the estate, the identity of the beneficiary, the available allowances and the relevant pension rules.

What should unmarried couples do now?

Couples should consider:

• Reviewing pension beneficiary nominations and expressions of wishes.
• Checking what benefits may be payable on death and whether the scheme gives trustees or administrators discretion.
• Understanding how pension death benefits may interact with the rest of the estate from April 2027.
• Reviewing Wills and the ownership of other assets alongside pension arrangements.
• Taking appropriate legal and financial advice before making significant changes to retirement or estate planning.

A pension nomination is important, but it does not replace a Will and does not, by itself, determine the IHT treatment of the benefit.

The rules are complex and may differ according to the scheme and benefit concerned. Advice should be based on the actual pension arrangements rather than assumptions about how pensions are treated in general.

4. Lasting Powers of Attorney: who can make decisions if you lose capacity?

Planning is not only about what happens after death. It is also important to consider what would happen if you became unable to make decisions for yourself during your lifetime.

A Lasting Power of Attorney (LPA) is a legal document that allows you to appoint one or more people to make decisions on your behalf if the relevant legal requirements are met.

In England and Wales, there are two types of LPA:

Property and Financial Affairs LPA

This can authorise your chosen attorney or attorneys to deal with matters such as paying bills, managing bank accounts, handling investments and dealing with property, subject to the terms of the LPA and the applicable rules.

Health and Welfare LPA

This can authorise your chosen attorney or attorneys to make relevant decisions about matters such as care, medical treatment and living arrangements when you lack the capacity to make those decisions yourself. The document can also address decisions about life-sustaining treatment, if the required option is selected.

Unmarried couples should not assume that living together gives one partner automatic authority to make these decisions for the other.

A partner may be closely involved in day-to-day life and may know the other person's wishes better than anyone else. Nevertheless, that relationship alone does not give them the general legal authority conferred by an appropriately registered LPA.

Without suitable arrangements, decisions may become more complicated, particularly where financial institutions, healthcare professionals or family members need to establish who has the legal authority to act.

LPAs must be made while the person granting the power has the necessary mental capacity and must be registered with the Office of the Public Guardian before they can be used. They cannot simply be created retrospectively after capacity has been lost.

Making an LPA is therefore a valuable step for unmarried couples who wish to give each other appropriate legal authority and reduce the risk of uncertainty in the future.

5. Joint property, mortgages and financial protection

For many cohabiting couples, the family home is their most valuable asset. It is essential to understand how ownership is recorded and what will happen if one partner dies or the relationship ends.

Couples who own property together should establish whether they hold it as joint tenants or tenants in common.

With a joint tenancy, the deceased's interest will generally pass automatically to the surviving joint owner. With a tenancy in common, each owner has a distinct beneficial share that can generally be dealt with under their Will.

Neither arrangement is automatically right for every couple. The appropriate choice depends on the couple's wishes, family circumstances, contributions and wider estate-planning objectives.

A declaration of trust may also be appropriate where the couple contribute different amounts towards the purchase price, mortgage or property improvements, or wish to record their respective beneficial interests.

Unmarried couples should also review mortgage arrangements, life insurance and any relevant trust provisions. These can help provide financial support to a surviving partner, but the terms of each policy and the legal ownership of the proceeds need to be checked.

Where children from previous relationships are involved, the position may require particular care. A couple may wish to protect the surviving partner while ensuring that children ultimately receive an inheritance. Achieving both objectives requires careful coordination of the Will, property ownership and any trust arrangements.

Do not leave your partner's future to chance

Living together can involve the same emotional commitment and financial interdependence as marriage. The law, however, does not treat every aspect of those relationships in the same way.

Without a Will, an unmarried partner may receive nothing under the intestacy rules. Without an LPA, they do not automatically have authority to manage the other partner's finances or make relevant health and welfare decisions. For IHT purposes, they cannot claim the spouse exemption or transfer unused nil-rate band allowances to each other. The pension reforms due to take effect from 6 April 2027 add another important reason to review existing arrangements.

The most effective approach is to plan ahead, understand your legal position and ensure that your documents work together.

Taking advice now can help reduce uncertainty, protect your partner as far as the law allows and provide greater clarity for your family in the future.

If you live with a partner and have not reviewed your Wills, LPAs, property ownership and pension arrangements recently, now is a good time to do so.