The judicial system does not give cohabiting couples any legal rights like married couples and those in civil partnerships. It is therefore upon the cohabiting couples to organise on how they can protect themselves and their loved ones.
From the late twentieth century to early twenty first century, there has been a steady rise in the number of unmarried couples who live together in a long-term relationship. Many perceive marriage as old-fashioned and inconvenient, a fact that is driving couples to shy away from marriage and resort to cohabiting. However couples who are married or in a civil partnership can have a great financial advantage upon the death of a partner.
There is a huge contrast in the rights of unmarried couples in the situation of death, when compared to those of married couples or civil partnerships (spouse hereafter refers to either). The Marriage institutions in situations of death confer the right of ownership of a deceased entire estate to the spouse, as stipulated under the intestacy rules. This is valid if there are no children involved. According to the Inheritance Act 1975 (Provision for Family and Dependants), the spouse has the highest rights to provision from an estate. The position is exactly the opposite in case of cohabiting couples.
Both of the married couples are entitled to the provision as deemed reasonable in all the circumstances of the case and the husband or wife is entitled to receive the inheritance whether the provision is required for their inheritance or not. This is contrary to the provision that stipulates that other claimants are also entitled to the maintenance as the applicants.
Inheritance tax (IHT) is not applicable for spouses that are both domiciled in England and Wales which means that in case of death of either of the spouse, an entire estate of the deceased can pass to a surviving spouse without any inheritance tax (IHT). The nil rate band which is currently £325,000 is transferable between spouses so the unused amount will be available for use in case of death of the second spouse. If the rules are effected as planned from 6 April 2017, then the proposed additional nil rate band for the family home will be made available to the children.
Married Couples can in their lifetime take advantage of the ‘no loss, no gain’ rule for capital gains tax (CGT) which means they can transfer assets between themselves without fearing a CGT bill.
Unlike married couples, cohabiting couples do not have any of these tax breaks. In case of death of a partner, their estate is subjected to inheritance tax (IHT) at the rate of 40 per cent. This comes into place if the estate exceeds £325,000 after any available relief and exemptions are considered. There is also no provision for applying the nil rate band and they can only take advantage of the yet to be approved additional nil rate band for the family home. A band which is only applicable if they have children or other direct dependants. This leaves cohabiting couples with no benefit in case of death of a spouse.
If any of the unmarried partner dies without leaving a will, there are no rights available to the surviving partner under the intestacy rules with which he or she would bring a claim under the 1975 Act, unless the spouse is capable of proving that they have been cohabiting for a period of two years prior to the death of the spouse and make a claim as a dependant.
Although the issue has attracted endless discussion with different commentators giving their views, the law has however failed to recognize any of the views.
Although marriage is not for everyone, some precautions should be taken especially where couples decide to cohabit for a long period of time. Having awareness on these issues can also help in taking the necessary measures which can also help one in avoiding the consequences in case of any eventuality.
For example when buying property as a couple, consideration should be given on how ownership of the property should be. Having a joint ownership or joint tenancy is a common practice and should be considered. Since issues regarding declaration of trust may arise, it is important to have details on the amount invested by each partner clearly noted so that legal disputes are avoided in case of death of a partner or relationship break up.
Having a will is equally important and can help in saving one from the legal disputes that arise after a partner’s death. It should however be noted that unlike couples that are divorcing, failing to amend your will after breaking up with your unmarried partner may as well give the partner a chance to inherit in case of death.
The law is remains complex in this area and as it stands there is little protection for unmarried cohabiting couples in terms of tax breaks and other rights enjoyed by married partners. For this reason unmarried couples are therefore encouraged to take the necessary measures to protect themselves and avoid any unexpected negative impacts that may have a devastating effect following the loss of a loved one.
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.