People who live together, possibly in a very long-standing
relationship, often assume that the surviving partner would be
properly provided for in the event of their death – the myth
of the 'common law marriage'. However, the law of
intestacy, which applies where someone dies without a Will, is
wholly inadequate for cohabitants. Similar issues also arise for
those cohabiting in a same sex relationship who could, but have
not, entered into a civil partnership.
You may have read recently in the papers that changes are coming
with regard to the law of intestacy. Certainly the Government has
accepted some of the Law Commission's recommendations to make
changes to the intestacy rules, but the proposal to change the
rules for cohabitants will not be implemented during this
Parliament.
The importance of couples in a long-term relationship having Wills
in place cannot be over-emphasised. Left to itself, the law will
generally not deal with your assets in the way in which you would
have intended. Cohabitees, certainly if they have children but even
if they do not, need careful advice on how their Wills should be
drafted to ensure their assets will go to the persons they would
want to benefit, and to try to reduce the heavy inheritance tax
(IHT) burden which will otherwise fall on them: the IHT spouse
exemption does not apply to a 'common law' wife, husband or
partner.
For cohabitees, other aspects of estate planning may not be as
straightforward as one might expect. For example, would the
cohabitee be eligible to benefit under an occupational or other
pension arrangement? If a suitable Will has not been made then even
a spouse or civil partner may encounter significant financial
difficulties following a death, but a cohabitee will almost
certainly find themselves with complex and costly matters to be
resolved, adding additional burdens at an already difficult
emotional time.
It is particularly important to address issues such as how the
family home is owned. Too often co-owners are not overly concerned
about this until the relationship between them breaks down, or one
of them dies. By this time it may be too late. Tax planning
opportunities may have been missed, and there may be argument,
distress and even litigation. The shares in the property need to be
agreed and formally documented, ideally at the outset but at least
before disagreement arises. This may involve appropriate provisions
in the cohabitees' Wills.
Documenting ownership of a joint property is vital in other
situations too: for example, where parents have assisted children
to purchase a property.
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.