The opportunities cohabitation reforms could create for solicitors and financial planners

The government has launched a consultation looking at the legal structures for cohabiting couples and how they could be reformed.

The consultation is exploring whether couples who have either lived together for three years or share a child should have more rights to financial settlements on separation and inheritance. It opened in June and closes in August, so the details have yet to be confirmed.

However, with approximately 6.5 million people now living together without being married, the consultation indicates that the law is beginning to acknowledge a reality that many professionals have been dealing with for years.

If any reforms are enacted as a result of the consultation, there could be new opportunities for solicitors and financial planners, particularly in the areas of separation, inheritance, and property rights.

Read on to find out more about the consultation and the opportunities it could lead to.

Cohabiting couples currently have fewer legal protections than married couples

Under the current rules, if an unmarried partner dies without a will in place, the surviving partner is not considered a rightful heir under the rules of intestacy. Similarly, if an unmarried couple separates, there is no legal or financial framework for how to arrive at a settlement, as there is with divorce.

The government’s consultation is exploring how this should change and what protections should be in place for long-term cohabiting couples or those with children.

Although legislation may still be some way off, advisers should begin considering how these reforms could affect the advice clients need.

The consultation could mean more clients need advice during separation or bereavement

Separation and bereavement are likely to be two key areas affected by any changes that come from the consultation. This may create new opportunities for financial planners and solicitors, as well as additional areas to collaborate in supporting clients.

If new reforms are enacted, solicitors can play a key role in helping unmarried clients understand their rights and settlements during a separation. This may include pension or property entitlement, child support, or other asset division, though the details of any proposals have yet to be confirmed.

Meanwhile, a financial planner could help them understand the long-term impact of those decisions. They can use cashflow modelling to demonstrate how different settlement options could affect retirement income, housing options, and overall financial security. This can help clients make informed decisions and give both them and their solicitor greater confidence during negotiations.

Similarly, if there are reforms to inheritance rights for cohabiting couples, more surviving partners may receive assets they would not previously have expected to inherit. Solicitors can ensure the assets are secured and the relevant legal structures are in place, while financial planners can help manage them effectively.

A financial planner can support clients with decisions such as ensuring their inherited assets are tax-efficient, updating their estate plans, and reviewing their protection policies following the death of a partner.

By working together, solicitors and financial planners can ensure clients receive joined-up advice that addresses both the legal and financial implications of major life events, helping them remain secure and stable through periods of significant change.

Legal rights alone do not guarantee financial security

Even if new legal protections are introduced, clients will still face complex financial decisions during separation or bereavement. Receiving an inheritance or financial settlement is only the beginning.

Clients may suddenly need to:

• Restructure their household finances
• Invest or manage a lump sum
• Decide whether to retain or sell a property
• Review their pension arrangements
• Understand the tax implications of inherited assets
• Update their long-term retirement plans
• Revise protection policies and estate planning.

These are often areas where financial planners can add considerable value while allowing solicitors to focus on the legal process.

Existing clients should not wait for legislation

Although reforms are being considered, nothing has changed yet. For clients currently living together or sharing children without being married, the existing risks remain.

Solicitors can continue to encourage clients to put appropriate wills in place and to consider cohabitation agreements. At the same time, financial planners can review their estate plans, protection policies, and long-term financial security in the event of a separation.

Taken together, these conversations can significantly reduce the financial uncertainty that unmarried couples may otherwise face.

Get in touch

Whether the proposals ultimately become law or evolve into something different, they highlight the growing need for joined-up professional advice.

To find out more about how our sectors can collaborate for the benefit of our mutual clients, get in touch.

Email info@fbwealth.co.uk or call us on 0333 1122211.

Please note

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

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

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.