What are the financial implications of marriage?

Thankfully, society has moved on since the 1800s. However, does marriage remain an economic proposition?

Marriage is considered the ultimate gesture of love and commitment. It can be easy to overlook that marriage is also a binding legal contract carrying rights and responsibilities, including financial obligations.

Financial benefits during marriage include:

• Marriage Allowance: Spouses may be able to transfer £1,260 of their personal tax allowance to reduce household income tax.
• Inheritance Tax (IHT): There is usually no IHT payable on assets passed to your spouse on death. IHT may otherwise be charged at 40%.
• Pensions: You may be entitled to benefit from your spouse’s pension on death.

Marriage also gives rise to financial claims in the event of divorce. The court has the power to make a wide range of orders such as:

• The transfer of ownership of a property, including from joint to sole names and sole to sole names.
• The sale of the property and how the net proceeds of sale will be divided.
• The payment of a cash lump sum.
• The payment of spousal maintenance to meet income needs.
• The sharing of pension benefits or income.

Cohabiting couples, who are not married or in a civil partnership, do not have the same financial protection on relationship breakdown or death of their partner. This is the case even if they have lived together for years or have children, and there is no such thing as a common law marriage. Cohabitants do not, for example, have claims for spousal maintenance, or on pensions and other assets owned in the sole name of the other. Cohabitants are instead reliant on land and trust law or bringing a claim for the benefit of children. This limited legal protection leaves cohabitants in a vulnerable position, despite cohabiting couples making up the fastest growing family type. Despite the Law Commission having recommended reforms for cohabitation law, no action has been taken to implement these changes.

If you would like further information, then please get in touch with a member of the Blake Morgan Family Team.