Common law marriage "myth"
If you and your partner are unmarried or have not entered a civil partnership, then the intestacy rules (not having a Will) are not your friend. Intestacy doesn’t recognise these relationships, so your partner will receive no benefit from your estate. The concept of ‘common law marriage’ is only a myth and has no legal basis. In the eyes of the law, you could have met online yesterday.
Living together as a couple for a certain period does not grant you the legal status of 'common law spouses'. If you are not married, you have no right to inherit from your partner's estate if they die without leaving a will.
To avoid confusion, a cohabiting couple is two people who opt to live together outside of marriage or a civil partnership yet are in a relationship.
Rights under law
The terms of inheritance law are clear. If you live with your partner but are not married or in a civil partnership, you have no entitlement to your partner's property or assets on death. The situation is no different, even if you have children together. In essence, the law favours married couples or civil partnerships. If unmarried, the surviving partner receives nothing.
If an unmarried partner's significant other dies without a will, they may be able to apply for provision under the Inheritance (Provision for Family and Dependants) Act 1975. A cohabiting partner can apply for provision as long as they have lived in the same household as the deceased person for two years before their death.
If you are cohabiting with your partner and wish to make sure they inherit from your estate, you should make a will. If you jointly own a property with a partner (and this is registered at the Land Registry), you are entitled to your share of that property.
Funerals
Equally distressing can be when, without a Will, the unmarried partner has no rights to decide funeral arrangements or even what happens to the body or ashes. If no close family members are unavailable or do not wish to be involved then the Local Authority in which they died (not lived), has the responsibility for sorting out the funeral arrangements and the disposal of the body (s.46 of the public health (Control of disease) Act 1984).
TAX
Married couples or those in a civil partnership have an unlimited tax allowance between themselves. All others do not. Therefore, any amount exceeding the Inheritance tax (IHT) Nil-rate band (NRB) allowance, which is currently £325k will be taxed at the prevailing rate of 40%.
One effective way to reduce this 40% liability is to use a trust. Various types of trusts are available, but those with a discretionary trust (DT) element are typically the most suitable. While there is a separate article dedicated to discretionary trusts, here is a brief summary.
Put the Equivalent NRB into a trust on 1st death = £325k. This is now IHT-exempt.
You can then give your partner £325k IHT free. saving up to £130k
For Trusts, there are setup, entry, anniversary, income and exit fees & taxes, though these are usually below the amount you save.
Exceptions to common law status
It is said that there is an exception for every rule, and sometimes these make a bad situation worse.
Scenario 1
In Banfield v Campbell [2018]. Mrs Campbell left £5000 to her "friend", Mr Banfield and the family home and everything else to her son James on his 25th birthday. She did not, however, update her Will for several years.
On a flight back from the Canary Islands, Mrs Campbell died. James and other Witnesses claimed Mr Banfield was like a lodger as he slept in a separate room, though he did not pay rent because Mrs Campbell did not wish to be alone.
Not satisfied with the £5k, Mr Banfield challenged the Will, stating that he was a financially dependent cohabitant and could not afford his own home. The Judge ordered that Mr Banfield receive a maintenance allowance. Mr Banfield claimed this was not enough. The result was that the judge ordered the home to be sold, and Mr Banfield was given a life interest over half the proceeds. Mr Banfield applied for more, but the judge ordered the other half to go to the son since he was the intended beneficiary of the will.
Scenario 2
If a property owner enters care, the home will be disregarded for the means test if an unmarried partner or another relative lives there as their sole or main residence. However, councils have discretionary powers to consider "all relevant factors." Therefore, if it is determined that the residency is primarily to preserve a family inheritance or to avoid the sale of the property, they may choose not to disregard it.
These cases highlight the importance of keeping your planning current and regularly reviewing Wills as relationships evolve and change.
Acknowledgement to Siobhan Rattigan, Senior Lecturer for the College of Will Writing.
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