Essential financial planning for couples: Six important checks to make

We often emphasise the importance of individual financial planning, helping you to build a stable financial future for yourself. But when you’re in a long-term relationship, married or not, it’s likely that your finances are deeply intertwined with that of your partner.

If you’re married, you might assume that your finances are neatly combined, but this isn’t always the case. And, just like any other committed couple, unmarried partners could benefit from having open and honest conversations about their finances and plans for the future together.

An easy way to get that conversation started may be to go through a checklist of sorts and discuss each step as it comes up, rather than waiting until it’s too late.

So, seeing as Valentine’s Day has just passed, here are six financial checks you could make with your partner to build a brighter future together.

1. Talk about the “what if?” scenarios when you buy property together

Purchasing a property alongside your partner is perhaps one of the biggest commitments you can make to the relationship.

Within this, one of the most crucial decisions you’ll need to make is how you own the property as a team. Both married and unmarried couples will have the choice as to whether they buy a house as “joint tenants” or “tenants in common”.

Joint tenancy means you own equal shares in the property, even if the initial contributions to buy were unequal. If you were to sell the property, you would legally be owed your 50% share of the profits. This is one of the most common choices for married couples, but unmarried couples may prefer to be tenants in common.

Tenants in common specify how many shares they hold in the property. For example, one partner may hold 70% of the property’s shares and the other 30%. In the event of a sale, you would be entitled to your share of the property. If the relationship breaks down and one person chooses to stay in the property, they will likely need to buy their partner’s shares to achieve full ownership.

Keep in mind that unless you’re married, the shares of the other tenant in common don’t automatically pass to the other owner if one of you passes away and you’re unmarried. This would need to be stipulated in a will. However, unmarried joint tenants do inherit one another’s share if the other dies.

Before purchasing a property together, you may also want to consider drawing up a cohabitation agreement. These are not legally binding but can be useful. A cohabitation agreement could outline financial responsibilities, including the ownership of fixtures and fittings, how to manage debts accrued in the relationship, as well as how other properties or assets are shared.

This could help prevent disputes later down the line and provide upfront clarity.

2. Write a will to ensure your assets can be distributed according to your wishes

If you’re married and one of you passes away without a will in place, your entire estate will usually pass directly to your spouse or civil partner. This leaves no room for granting an inheritance to other members of your family, including your children.

Plus, if you’re unmarried and one of you passes away without a will, your assets will be distributed according to intestacy rules, which may not reflect your wishes. Intestacy rules don’t account for unmarried partners, only spouses and blood relations.

Fortunately, with a will, you can specify exactly how your estate should be distributed. This may ensure that your partner and any children you share are provided for according to your wishes.

3. Register Lasting Powers of Attorney for both parties

It’s difficult to dwell on scenarios that could change the course of your life for the worse, but these events do happen, and it’s important for you both to be prepared.

A Lasting Power of Attorney (LPA) allows you to appoint someone you trust to make decisions about your health or finances if you lose mental capacity. This may include brain injuries, strokes, dementia diagnoses, or other forms of illness.

Even in the case of married partners, your spouse won’t always have access to financial accounts or be able to make decisions regarding your health once you lose capacity. Plus, a property and financial affairs LPA can be put into action even before someone loses mental capacity, meaning there’s greater flexibility for ensuring your wealth is used in your best interests.

So, in all relationships, it may provide peace of mind knowing that your “attorney” – most likely, your long-term spouse or partner – could manage your affairs if you need them to.

4. Discuss your pensions and form a retirement strategy

Both married and unmarried couples should treat their pensions as an important part of their joint financial future.

You could start by reviewing your individual pension statements to understand your current position together.

From there, consider discussing your individual retirement goals together and talk about the lifestyle you wish to achieve. You may find that in order to meet these goals, you need to increase your pension contributions or take other steps to overcome any shortfalls.

Keep in mind that, unless you’re married, most pensions will pass to your next of kin after your death, rather than to your partner. So, alongside building a strong joint retirement plan, make sure you have filled in an “expression of wish” form with your pension provider and stipulated the beneficiary who should receive the funds upon your death.

By working together and proactively managing your pensions, you could increase the likelihood of achieving your shared retirement goals.

5. Ensure you’re both financially protected against unexpected events

Protecting each other financially is essential, especially if you or your partner would struggle without the other’s financial support. Life insurance may be a helpful way to do this as it can provide a safety net if one partner dies.

This may be even more necessary if you have a mortgage or children together, as you may want to ensure that the costs are covered should something happen to you or your partner.

You might also consider ensuring that you’re both protected against illness or injury, by looking into income protection or critical illness cover. Both types of protection can provide invaluable support if one of you becomes too ill to work.

Work with a Financial Planner to find out how much coverage you need to ensure your partner can maintain their lifestyle while meeting any financial obligations.

6. Talk about how you will support your children as a team

If you have children together, financial planning may be even more critical.

First, ensure you have clear arrangements and expectations for child support, education expenses, and potential guardianship should you both pass away. A will can help with this, as you can specify who you want to care for your children if you’re no longer around.

Then, it’s also crucial to discuss how you wish to support your children financially in the future. You might already have an idea about how much you want to put towards their education, and if so, it may be wise to begin proactively saving and investing sooner rather than later.

A Financial Planner can help you work towards shared goals

Navigating your finances together can feel overwhelming, especially if you’re trying to balance your relationship with practical planning. That’s where a Financial Planner can help. Think of your Planner as a trusted adviser, helping you and your partner create a roadmap for your financial future.

Not only can a Financial Planner offer expert advice about a variety of topics, but they can also create a tailored plan that suits both your needs, whether you’re married or not.

Get in touch

We can help you join up your financial plans and assist both parties in working towards a secure, stable future.

If you’re already a client with us, we can expand on your existing financial plan. Or, if you’re looking for advice, talk to us about how we can support your financial journey.

Email us at enquiries@pen-life.co.uk, or call 01904 661140 to learn how we can help.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The Financial Conduct Authority does not regulate estate planning Lasting Powers of Attorney, or will writing.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.

Remember that taper relief only applies to gifts in excess of the nil-rate band. It follows that, if no tax is payable on the transfer because it does not exceed the nil-rate band (after cumulation), there can be no relief.

Taper relief does not reduce the value transferred; it reduces the tax payable as a consequence of that transfer.