A tax expert has claimed cohabiting couples are "living as second class citizens when it comes to tax rights" and the rise of such families increases pressure on the government to consider who benefits from inheritance and tax rights.
Gordon Andrews, tax expert at Quilter, spoke out after new population estimates from the Office for National Statistics revealed there are nearly six million cohabitee couples in Britain.
Mr Andrew said: "Once again the steadily-increasing trend of people choosing to cohabit shows no signs of abating. In 2017, one in eight people aged 16 years and over in England and Wales are cohabiting, which continues a 15-year increasing trend.
"These figures serve to illustrate a divergence from behaviours of the past where people didn't live together until they were married.
"Although this is no bad thing, it does mean that 4.7 million people who are living as a couple but have never married or civil partnered do not enjoy the same rights as spouses on death or the same financial protections a married couple with children. They are effectively living as second class citizens when it comes to tax rights.
"However, there is some indication that historic legislation that doesn't fit with modern behaviours is finally starting to change. Just last month, a Supreme Court landmark judgement opened the door to heterosexual couples being able to enter into a civil partnership, no longer making traditional marriage the only option.
"This opens up more avenues for those cohabiting, to access the rights associated with civil partnerships and marriages.
"Judgements like these increase the pressure on the government to carefully look at who deserves the inheritance and tax rights that marriage and partnerships involve. What needs to be considered is policy that affords rights to people who live together for an extended period of time so they too are protected even without entering into a civil partnership."
Quilter explained that cohabitating couples have different rights to those who are married.
A married partner would inherit all or some of the estate when their partner dies even if no will has been left.
However, if one cohabiting partner dies without leaving a will, the surviving partner will not automatically inherit anything - unless the couple jointly own property.
An unmarried partner who stays at home to care for children cannot make any claims in their own right for property, maintenance or pension-sharing.
Cohabiting partners also have no access to a partner's bank account if they die - whereas married couples may be allowed to withdraw the balance providing the amount is small.
Married partners have a legal duty to support each other whereas cohabiting couples are not legally obliged to support each other financially.
All married partners have the right to live in the matrimonial home.
However, if you are the unmarried partner of a tenant, you have no rights to stay in the accommodation if you are asked to leave.
Keith Churchouse, director and chartered financial planner at Guildford-based Chapters Financial Limited, said: "The number of co-habiting couples does appear to be in the increase and this does raise the issue of what financial rights each party has, and if they have a family and dependents, how they are all protected.
"Many assume that after some time of co-habiting has elapsed that they have some inherent protection, which may not be the case.
"Have they made wills? Does each party know where they are and how they operate? Do they have life cover or pension benefits and who are these nominated or placed in trust for? How is a property owned (joint tenants or tenants in common) and does this suit the needs required? Who has health cover and, importantly, who does it protect? Does it protect just the individual or the partner and family?
"The key point here, is get talking to each other to know who has what, what happens if complications arise and if the answer draws a blank, then take some advice."
aamina.zafar@ft.com
