Succession rights and estate planning for unmarried cohabitants

26 / 05 / 2017

Many assume that couples who are neither married nor in a civil partnership but who live together (“cohabitants” for the purposes of this article) have a “common law marriage” entitling them to the same rights as married couples or civil partners, but this is a myth from a legal perspective. Cohabitants, particularly high-net worth individuals, need to be fully aware of the legal limitations, and take action to protect one another in relation to succession and estate planning.

Cohabitants have no rights under the intestacy rules should either one die without a valid Will. This means the estate could pass to remote family members without the cohabitant being entitled to anything. An excluded cohabitant could make a claim for a share of their partner’s estate under the Inheritance (Provision for Family and Dependants) Act 1975, but the qualifying criteria can be difficult to fulfil. Cohabitants are prevented from claiming the same capital tax reliefs and exemptions as spouses and civil partners, meaning they will generally pay significantly more in inheritance tax and capital gains tax.

It is therefore vital that cohabitants seek advice so as to ensure their affairs are in order and these reflect their wishes. As a starting point, there are steps they should take when buying property together; and it is very important that each cohabitant makes a Will and keeps this up to date.

The succession to assets that pass outside of a Will, such as pension benefits and life policies, should also not be forgotten and the relevant documents put in place. Cohabitants who have made unequal financial contributions to their property should take extra steps to ensure an equitable division on death or relationship breakdown, and this often involves making a declaration of trust and perhaps a cohabitation agreement.

Please click here to read this article in full, first published in ePrivateclient on 25 May 2017. For further information on any of these issues, please contact Andrew or your usual Wedlake Bell adviser.