Following Martin Lewis' urgent warning to unmarried couples who are living together, Una Angus, a Senior Paralegal in our Wills, Estate & Tax Planning Team, sets the record straight in relating to "common law spouses" and inheritance.

Many cohabiting couples are under the misconception that they have legal rights as a so-called "common law spouse" This term is often bandied about, but in fact has no legal meaning and it is not the default outcome for the surviving "common law spouse" to inherit when one of them dies.

What inheritance rights do cohabiting couples have?

Under English law, if a person does not have a valid will in place when he or she dies, his or her estate (any assets capable of being transferred under a will or the intestacy rules) will be distributed in accordance with the intestacy rules; these rules do not provide for the survivor of a cohabiting couple.

Why is a will especially important for unmarried couples who live together?

Under the intestacy rules, if the first cohabitee to die is also survived by children, his or her estate will be given to those children outright at 18; if there are no surviving children, the estate will be given outright to the deceased's parents (or, if they have also died, to his or her siblings). Although the surviving cohabitee may be able to make a claim from the deceased's estate under the Inheritance (Provision for Family and Dependants) Act 1975, litigation is intrinsically stressful and expensive.

By putting a will in place you are able to choose:

  • The people who will deal with your assets
  • The people who will act as guardians for any minor children
  • The people and/or charities to benefit and the amount – whether cash gifts, specific items and/or a percentage of your estate.

What can impact valid wills?

Cohabiting couples with valid wills in place should be aware that subsequent marriage or formation of a civil partnership will automatically revoke their wills unless the documents state that they are made in expectation of marriage or formation of a civil partnership.

Do unmarried couples have to pay inheritance tax?

Unmarried couples do not have the same inheritance tax (IHT) benefits as their married counterparts. Assets passing between spouses are exempt from IHT ("the spouse exemption"). Every individual has an IHT allowance of £325,000 ("the nil rate band") and, if certain criteria are met, an additional IHT allowance of £175,000 ("the residence nil rate band"). When a married individual dies, his or her unused IHT allowances are passed to the surviving spouse. When an individual in an unmarried couple dies, there is no spouse exemption and the nil rate band and, if available, the residence nil rate band are not transferrable to his or her surviving partner. Instead, the deceased's available IHT allowances are applied to the value of his or her estate and if the value exceeds these, the excess will be taxed at 40%.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.