The increasing complexity of inheritance laws makes it more important than ever to plan for the future. Planning ahead not only makes the estate administration process easier for your loved ones, but most importantly should ensure that your wishes, including how you would like your estate to pass on your death, are honoured.
For those cohabiting in a long-term relationship - colloquially referred to as "common law spouses" - it raises an important question: Does marriage really matter? The simple answer is yes, it does.
While cohabitation is becoming a more common living arrangement for couples, it brings unique challenges when it comes to inheritance under English Law.
Unmarried couples are not offered the same automatic inheritance rights as their married counterparts, which can lead to complications if one partner passes away. Understanding the legal nuances of inheritance for common law spouses is essential to ensure that the interests of both partners are protected, and their assets are distributed in accordance with their wishes.
- Under the Administration of Estates Act 1925, inheritance is passed in a specific order if no Will is in place, with "spouse or civil partner" at the top of the list, and with cohabiting partners not on the list all. With no Will in place, even the Crown would inherit in priority to a cohabitating partner with whom you are not married/in a civil partnership, even if you share children together! The UK government advises that "a partner who was not married or in a civil partnership with the deceased has no automatic right to inherit," unless cohabiting partners have made Wills specifically bequeathing their estate to each other. Without a Will or a legally recognised partner, the estate will pass to the deceased's children, parents, siblings, or other surviving relatives, which could also lead to significant complications depending on the couple's financial circumstances.
- Another significant factor to consider is inheritance tax (IHT). Transfers between married couples or civil partners upon the death of one partner are exempt from IHT. Additionally, any unused portion of one partner's nil-rate band (currently £325,000) can be transferred to the surviving partner, effectively doubling their IHT-free allowance to £650,000. Unfortunately, common law spouses do not benefit from this exemption.
The key takeaway here is not to rush your significant other to the altar, but to carefully consider how you want your estate to be administered after your death and what steps you may wish to take to facilitate this.
Whether this involves taking steps to affirm that your relationship is legally recognised or making sure your Will is up-to-date and accurately reflects your wishes, the most important thing is to plan ahead.
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.
