To have and to hold
Arranging insurance for married couples should arguably go hand in hand with saying “I do”.
Financial matters are perhaps not the first consideration when getting married. But it is vitally important to review current financial arrangements and establish new plans at the start of a significant new stage of life.
Perhaps the first and most obvious thing to consider is wedding insurance, given that even a simple ceremony and reception will cost many thousands of pounds – £25,090 on average, according to a recent survey.1
But once the honeymoon is over, the serious thinking needs to start, and this is the point at which couples will need financial advice.
At the simplest level, a couple might want to maximise their ISA allowance and other tax-efficient investments, perhaps by moving some assets from one spouse to the other, thus taking advantage of the fact that transfers to a spouse are exempt from Capital Gains Tax. They may also want to think about their pension beneficiaries, dividend income and property ownership; and they will of course want to update their Wills.
But there is another reason why marriage is a financial marker: it is a time when people first start sharing their lives – and their debt – with someone else. Consequently, it is an opportune moment to put some protection such as life insurance in place.
Life insurance should be a high-priority consideration, as it can provide the security that money is available to meet mortgage and other financial commitments should one partner die. Similarly, a ‘joint-life second death’ whole-of-life policy could help settle Inheritance Tax liabilities when both individuals have passed away.
Life cover should be put in place even by those who do not consider themselves to be wealthy – and it is relatively straightforward to arrange. However, not everyone will be able to secure cover through the standard market.
“Increasingly, people are getting married when they are older or indeed getting married for a second or third time,” says Torquil McLusky, managing director at Pulse Insurance, a specialist insurer.
“An older couple may have significantly more complex investment needs; older people may also have health problems or age-related issues which mean that the standard insurance market is not able to help. This is where specialist providers that offer access to the Lloyd’s market can sometimes be needed,” he says.
“Specialist insurers can provide cover for people with pre-existing conditions and can also offer cover for older couples who may suddenly have mortgage commitments or other financial obligations at a stage of their lives when they had been expecting to be thinking more about taking it easy, rather than carrying on working.”
Till death us do part?
We all hope that marriage will last forever, but the fact is that more than 40% of marriages now end in divorce2. Inevitably, financial plans made as a married couple may not survive a divorce – especially if they no longer make financial sense.
“Unfortunately, divorce is not something that we can insure against,” says McLusky. “The best we can probably do is a prenuptial agreement, which, although not yet recognised in statute, the UK courts will at least take into consideration when making a settlement.”
Many couples will have joint life insurance policies in place, and often the premium is paid by just one of the parties. If that spouse stops paying or cancels the policy, then the other partner could be left without life insurance.
If a partner has custody of the children, it is often prudent to maintain a life insurance policy on their ex-spouse with a benefit amount high enough to replace maintenance income.
Sadly, lots of break-ups become bitter or lengthy because couples can’t agree how to split the finances or continue paying insurance premiums. In those cases, individuals will need some professional financial and legal advice.
“The bottom line is that divorce means thinking again as far as financial planning is concerned,” adds McLusky.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.
Will writing involves the referral to a service that is separate and distinct to those offered by Cooper Associates are not regulated by the Financial Conduct Authority.
1 www.hitched.co.uk, accessed 30 May 2017
2 Office for National Statistics, November 2015