This is Money Podcast
The big inheritance shake-up for unmarried couples - and what it means
05 Jun 2026
Transcript generated automatically by AI and may contain errors.
Chapter 1: What is the main topic discussed in this episode?
Welcome to This Is Money podcast sponsored by Trading 212. Download the Trading 212 app today and open a cash ISA with promo code TIM to get the 12 month bonus promo rate of 4.76% term supply. I'm Georgie Foster and joining me and Simon Lambert today is Lee Boyce and coming up. Could unmarried partners get automatic inheritance rights?
The government is looking at new reforms to better reflect modern society. Ali has been speaking to the deputy PM about the new proposals. Also today, don't fancy DIY investing but worried about too much Elon in your passive portfolio? Simon will tell you how to invest in cheap index tracker funds properly. Plus more bad pension saving news and inconvenient parkers. What can you do about it?
Don't forget your steps today with all the latest breaking money news. Just go to thisismoney.co.uk or download the app. But first, for years, we've been reminding listeners on the pod, there is no such thing as a common law spouse. So write a will.
all be about to change under new government proposals, which would mean millions of cohabiting couples could gain automatic inheritance rights if a partner dies without a will. The plans would also create new rules for dividing property when unmarried couples separate and strengthen protections for domestic abuse survivors. Welcome, Simon. Welcome, Lee. Hi, Georgie.
Yeah, so this is a kind of idea put together by David Lammy's Ministry of Justice. There are three and a half million cohabiting couples that are living together but don't get the same rights as you do when you are married.
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Chapter 2: What changes are proposed for unmarried couples regarding inheritance rights?
And what that creates is quite often inheritance problems, problems around property. You may have children, but you may not be married. There's all sorts of scenarios in which people aren't married yet. and don't have the kind of rights and protections potentially you have as a married couple. You know, it's the modern world.
Things have changed quite a lot in the last 20, 30, 40 years, I would say. In regards to this, people are probably having long relationships outside of a marriage. Mr. Lammy himself, who I interviewed about this, and you can hear his voice in a little while,
were saying that basically young people are putting off marriage because it's expensive to get married and something like 51% of children are now born outside of marriage.
So, and I think what they're trying to set out here is better protections, better rights to make sure that family finances aren't blown apart in the case of a breakup, especially protecting children in those kind of circumstances. Now, this is a consultation, so we'll kind of put that out there that, you know, this isn't...
coming in and it's not coming in in the way, shape and form it's kind of been outlined at the moment. It will run until the 14th of August. Mr Lammy was very clear to say that lawyers, academics, charities and the public will be able to have their say on these proposals. The thing is and one of the kind of
points to it that I kind of was questioning is you know does this kind of water down a little bit the concept of marriage because marriage does give you those rights to finances and I think most of us are aware and know that you know does it make marriage even more of a kind of
not a pointless exercise but it kind of waters down uh the kind of idea of marriage a little bit i think that's one thing that definitely our commenters in this story are talking about and they kind of understand it but there are also circumstances in which it probably makes sense for more rules uh and more rights to come into place as i say in this kind of new modern world i
This is going to throw up potentially some very complicated cases. Think money, property might not fall into the hands you might necessarily have wanted it to. And how do you negate and fight back on all of that? So all of this is in the proposal phase. And, you know, as I say, it's an interesting concept and it affects a lot of people. It'd be interesting to see how it goes and what comes of it.
As someone who is unmarried and who owns a home with someone, this is something that is very relevant to me, although I do have a will, as does my partner. However, this is not just about married couples. There are quite a few famous cases in the past of sisters that have been living together and haven't been able to have the house, etc.
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Chapter 3: How could the new inheritance proposals impact cohabiting couples?
So what it means is that effectively a married couple or civil partners can pass on a million pounds tax-free, Ā£325,000 each as the standard nil rate band, and then Ā£175,000 on top of that to cover their own home if it's passed to a direct descendant. Now, obviously, this also acts against people who don't have children.
So in a scenario where you've got two siblings who own a property, it's quite often the case where two siblings who own a property may be doing that because they don't have their own families and don't have children. So there's a double disadvantage there. And there have been scenarios in the past, and I personally know of one involving a former neighbor where I grew up where
You know, there were two siblings living together and there was a substantial inheritance tax bill in that house after the other person's death. And arguably, if you've got two siblings who've been living together for many years, that does feel deeply unfair.
But to go back to what we're talking about here, if you've got a cohabiting couple that we've decided have now been cohabiting for so long that they qualify for the new rights that are being consulted on... should that cohabiting couple not be able to get the same benefit of being able to pass on that property inheritance tax-free?
Because you could find a scenario where someone inherits the property due to these new rules, but then is forced to sell the property due to the inheritance tax rules. So it does create a little bit of a minefield. Now, there's always the thing of like, you may not want to get married, but you could become civil partners.
And I do think this is something that is worth considering for cohabiting couples, despite the suggestion here. of these new rules is like, I do, I totally understand. Lots of people say that thing of, well, just get married. Just, it's just a formality. Just get married. Just do it for the, just do it for the monetary, just do it for the financial benefits.
But it's like, well, people are like, no, do you know what? I don't want to do that. But you could do a civil partnership. But I think people don't want to do a civil partnership potentially for the same reason. And obviously that route then isn't open to siblings anyway. So it's definitely something that when we read it, it's like, this looks good. This looks like a good idea.
And then it starts to open many, many more questions.
I think it's just write a will. Just write a will. Just write a will.
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Chapter 4: What are the potential challenges with the proposed inheritance reforms?
But we do not want to disadvantage greatly people who are cohabiting, recognizing that in the modern world, there are many people cohabiting and also recognizing, for example...
that with domestic violence still an issue in society, women fleeing marriage, we don't want to disadvantage those women who have been cohabiting with a partner and end the relationship, get the courage to end the relationship and therefore disadvantage the result for her or indeed her children.
So for all of those reasons, it's right that we bring rights to those who are cohabiting, but they are not the same rights to those who choose to formally enter into a marriage.
And one last question for me. In this proposal, there was a mention here about prenups and making sure that they're legally binding in cases when they go to divorce. At the moment, these arrangements aren't completely watertight, although courts usually do give way to them if they're fair. What kind of changes can we expect there on the prenup side of things?
Well, you're absolutely right. Prenups are more common. They're currently not automatically enforceable. And they're only upheld if the court determines that they are fair. And there's uncertainty about what that effectively means. So that's why we're proposing legally binding nuptial agreements. with safeguards to ensure that the vulnerable are protected.
And these safeguards will include making sure that individuals have separate legal advice to make sure that there's nothing, no conflicts there, and that prenups must meet financial needs. For example, ensure that there's enough money for a partner to be rehoused.
Right. That was Ali speaking to Deputy Prime Minister David Lammy about the new proposals. So, Simon, let's talk about investing. For most investors, the advice has been to forget trying to bother picking your own stocks. Just get a cheap tracker fund. Let the market do the work.
But exactly how do you do it and how do you do it well, especially as if everyone is buying the same handful of giant US companies through tracker funds? Are we less diversified than we think? Are we just buying a lot of US tech and in that a lot of Elon? But anyway, we'll get to that part, Simon. Index tracker funds. Where do they come from? What are they? How do they work?
Index funds. An index fund is simply a fund that follows a certain market or index, so to speak. Now, that index could be a very, very broad one, such as the global stock market. It could be a narrow one, such as a country's stock market, for example, our own FTSE 100, or it could be a basket of other investments. It could be a basket of certain types of stocks.
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Chapter 5: How can cohabiting couples protect their financial rights?
And investors who hold his investment trust or his funds have been falling behind the market.
Simon, is that because he's not picked well or because of the US tech just going bananas?
Investment styles come in and out of favour. Sometimes the stuff that's going up is not the stuff that one type of fund manager might pick. And that's where the whole, you know, you should just invest in a tracker fund comes in. But a big part of this is the stratospheric gains of the US stock market, which have been driven by a small number of US tech funds. So yes, that's what's driving it.
And that's what's making it really, really difficult for active fund managers when you compare their performance to a tracker fund. Because actually what you should be doing before you ever invest in somebody's fund is going, well, could I just not use a cheap tracker instead? Because costs compound over time. And this is exactly what's happening.
You know, to go back to what I was going to say, Terry Smith, fund Smith, you know, global fund manager. So theoretically, we'll be benefiting from the whole US thing and everything like that. Doesn't pick those kind of stocks, has concerns over the valuations of some of those tech stocks. Got lots of managers in this position.
So because they're not holding them in the same proportion as the index and those big stocks in the index are driving the index up, they're falling behind the index. Now, there is an argument for active fund management in places that are less well-researched, things like smaller companies, emerging markets, stuff like that, where the index might be capturing a lot of dross as well.
But to go back to the question you said earlier on... It's all very well saying this and saying, well, the global market is too overexposed to these large mega cap companies. But if you listen back to episodes of this podcast, you'll find me saying this one year ago, two years ago, three years ago, four years ago, five years ago.
And betting against those big US tech companies has cost you a lot of money in the gains that you could have made.
Well, how do you decide, though? Because we're having so much noise about SpaceX and Anthropic. Goodness me. Do you really want 1% of your portfolio in SpaceX?
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