Planning

Combining your finances: the myths

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What happens when you join your finances with your partner's? We separate fact from fiction

Myth: If I merge my finances and my partner has a bad credit score, it will ruin my individual rating

Truth: Simply marrying or living with someone with a bad credit score shouldn't affect your rating, as their information won’t appear on your file. However, if you’re financially linked to them – for example if you have a joint mortgage or joint bank account – they will be listed as a financial associate on your credit report. This is when it can become an issue, as it means lenders may also check their credit report when you make an application, as their financial circumstances could affect your ability to repay. This is why it’s a good idea for couples to discuss their individual situation before combining their finances.

Maintaining your own separate bank accounts means you will each sustain an active credit record in case you want to borrow on an individual basis.

Myth: If we don’t marry, my partner will get nothing if he or she outlives me

Truth: This depends on the instructions given in your will – if you’ve made one – and the extent to which your finances are joined together. If there is no will, there are laws that dictate how your money and assets are distributed. Usually, in this case the assets will go to the next of kin and not your partner. For more information, read our article on Taking care of a deceased person’s estate.

If you and your partner have separate bank accounts and you die, the money in your account will become part of your estate and will be distributed according to your will. This means that your partner will not automatically inherit any money unless you have named them as a beneficiary in your will. The same applies to property. However, if you own your home together, your partner will be entitled to part or all of the property, depending on how it is owned. For information on different types of property ownership and what happens when one partner dies, visit the Government website.

If you die before your partner, your state pension is not automatically passed on to them. Different rules apply to company and private pensions, so you would need to look at these with your solicitor.

Another option to consider is a cohabitation contract. Although not all clauses are enforceable by law, cohabitation contracts are a way of securing an unmarried couple's financial arrangements. For more information, visit here.

If you are an HSBC Premier or Premier qualifying customer you can also book an appointment with an adviser.

If you are not an HSBC Premier customer, or are not eligible for HSBC Premier, we can only provide advice on protecting your mortgage and family, we also have a range of online tools you might find useful. More details.

To find out more about making a will and to request an HSBC will writing pack, click here.

Myth: A prenuptial agreement will protect my assets if the marriage doesn’t work out and we get a divorce

Truth: Prenuptial agreements are not legally binding in the UK and it is up to the divorce courts to decide how your matrimonial assets are divided. However, recent cases have shown that, although they are not enforceable in the UK, judges may take them into consideration when dividing a couple’s finances.

If you merge your finances with your partner’s, you may find it useful to make a record of how you spend within the relationship and contribute to any joint outgoings.

Myth: It's cheaper to get married in the UK than it is abroad

Truth: The average wedding overseas costs approximately one-third of the average UK wedding, which, according to research from Mintel, is almost £20,000. If you choose to get married abroad, it’s worth considering that your guests may have to pay increased travel costs to attend the wedding.

Myth: If I get married, I am automatically liable for my partner’s debts

Truth: You are liable for any debts that are in your own name only, but not for any that are just in your partner's. You may be responsible for the whole of debts in joint names and for other debts for which you have 'joint and several' legal responsibility. For example, in England and Wales, if you owe council tax, you and your partner will both be responsible for the debt, regardless of whether one of you contributes or not.

For more information on what happens with debt when you get married or live with someone, visit the Citizens Advice Bureau Advice Guide.

Myth: There are many tax advantages for married couples

Truth: Although the Married Couple's Allowance is now aged related and only available to those who got married before 5th December 2005, there may be other ways that married couples can increase their tax efficiency. You may be able to save on tax by splitting your assets in the most efficient way to make full use of your tax-free personal allowances. For example, if one of you is a top-rate taxpayer and the other a basic rate or non-taxpayer, you may be able to pay less tax as a couple if you put your assets in the lower earner’s name. For more information on the Married Couple's Allowance, visit the Government website.

If you are married or in a civil partnership, you do not have to pay tax if you want to transfer major assets to your partner and you are exempt from paying inheritance tax on money inherited from them.

For information on personal tax allowances, visit the HM Revenue & Customs website.

Check if you qualify for advice

If you have £50,000 or more in savings and investments, you may be eligible for HSBC Premier Financial Advice. See the full eligibility criteria.

If you don't qualify for HSBC Premier Financial Advice or if you'd rather not pay for advice, see other ways we can help.

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Everyone's circumstances are different and what applies to one person may not be right for someone else. The suggestions above are based on a general assumption of each circumstance and they are not intended to provide advice or recommendation.