Our expert solicitors are on hand to help navigate the effects and opportunities created by the Budget.
Written by Merlin Lewis. The recent budget has brought about significant changes to taxation and…
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Written by Lauren Costelloe
Many cohabiting couples in the UK believe that once they have lived together for a certain length of time, they become married in the eyes of the law and obtain the same legal rights as couples who have formally married. This notion is best known as a Common Law Marriage.
Unfortunately, this notion is a myth which has most recently been busted on 19 October 2022 when the Government rejected the Women and Equalities Committee’s recommendation for the law to be reformed to this effect.
My colleague, Hayley Coyne, has written an article detailing the recommendations in more depth, as well as their implications on divorce and family law. You can read Hayley’s article here.
The recommendations have implications not only on the law of divorce, but also on inheritance and tax planning. In the fourth recommendation of the paper, the Committee called for the rules of intestacy to be altered by way of cohabiting partners being afforded the same entitlement as their married and civil-partnership counterparts.
The traditional rules of intestacy continue to apply– that is, if you are living with your long-term partner and pass away without a Will in place to confirm your wishes, your partner will not inherit any of your estate. Instead, your estate will pass to your closest living relatives. If you were married or in a civil partnership in this scenario, your spouse/civil partner would be entitled to the entire estate (unless there are children, in which case your spouse/civil partner is entitled to the first £270,000 then half of the remainder).
Married couples and civil partners also benefit from the transfer of the Nil Rate Band (NRB) and Residence Nil Rate Band (RNRB) on death. The NRB and RNRB are an amount you are able to offset against the value of your estate at death before being required to pay Inheritance Tax. The NRB and RNRB are doubled for married couples and civil partners in order to benefit their direct descendants. Again, this is not the case for cohabiting couples.
The rules could be seen as archaic given that marriage rates have fallen to their lowest on record since 1862, reflecting a shift in social values. Current legislation does not align with this shift. Recent studies have indicated 60% of UK adults do not have a Will, leaving over half of the population financially vulnerable in the event their partner sadly passes away.
Thankfully, there are things you can do to ensure your estate is distributed in line with your wishes, as well as reducing the tax implications of the same, without having to get down on one knee!
Seeking legal advice from one of our expert solicitors can make all the difference by empowering you to make informed decisions and giving you peace of mind.
If you would like to discuss tax planning and Wills, please contact one of our Private Client lawyers.
https://committees.parliament.uk/publications/31430/documents/176284/default/
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