Are you a cohabiting family?
The ‘cohabiting family’ is the second largest family type representing 3.3 million families in the UK. This popular form of family type suffers from a legislative gap when compared with those who are married, or in a civil partnership. This means that those who cohabit lack certainty on their position in the event of a relationship breakdown or the death of their partner.
Statistics reveal that over 60% of people who cohabit believe the ‘common law marriage’ myth; that is, if they are together long enough, they will be treated as if they were married by law. This ‘myth’ is totally untrue and can cause devastating problems when one of a cohabiting couple dies without making provision for the other.
Potential problems for cohabitants on the death of their partner:
1. Lack of provision in the deceased’s partner’s Will:
If a partner dies intestate (without having written a Will) and having made no provision for their cohabiting partner, the surviving partner would have no automatic right under the intestacy rules to the deceased partner’s assets. For some, the only way to access their partner’s assets would be through bringing a claim under the Inheritance (Provision for Family and Dependents) Act 1975. And in the worst-case scenario, the surviving partner may need to bring a claim against their own child who may have an automatic right to inherit.
2. Bank accounts in sole name:
If bank accounts are held in the sole name of the deceased, again the surviving partner has no automatic right to inherit anything in the accounts. The situation is different if the couple were married or in a civil partnership or held the account jointly. In this situation, on the death the account would automatically go into the name of the surviving partner.
3. Inheritance Tax:
Married couples, or those in civil partnerships are able to benefit from transferable allowances, whereas cohabiting couples cannot. As a result, they face higher inheritance tax bills.
4. Lifetime gifts:
Gifts made during a married couple’s, or in civil partnership’s lifetime to their spouse are exempt for IHT purposes. This is not the case with cohabitating couples, because if they make a gift to each other during the 7 years before their death it can become taxable.
How cohabitants can protect themselves
Ensure you have made a valid Will making provision for your cohabiting partner and children.
For those cohabiting couples that own property we can create Wills that reduce Inheritance Tax liability, protect children of former relationships, and much more.