It estimated that there are more than 3.3 million unmarried couples in Britain who live together with shared financial responsibilities, nearly half of whom have children. Too many of them believe that this kind of long and committed relationship has the status of a ‘common law marriage’ – that if one of them were to die, the other would inherit in the same way as they would if they had been married. They rely on this to have at least the comfort that the family home could continue to be available to the remaining family, and that the survivor would cope financially.
This is a seriously mistaken notion of what the law says. If a couple is not either married or in a civil partnership then the survivor has no automatic rights of inheritance at all, though it may be possible to apply to the Court for a share.
This gives rise to two major problems. One is making sure that the assets would end up where they are needed. This can be achieved by making wills, and keeping them up to date. The other is solving the tax problems that come from the fact that a cohabitee cannot benefit from the inheritance tax exemption for married couples and civil partners. This is much more difficult but it may be possible to improve this situation by careful lifetime planning. Even so ,it will be a different world from the assets simply passing tax free.
Too many cohabiting couples either do not realise that they need to take positive steps to be able to overcome the fact that the law treats their relationship in this way, or they do not get round to doing anything about it.
So will Teresa May’s announcement at the Conservative Party Conference that civil partnerships will no longer be restricted to same sex couples solve the problem?
The answer is both yes and no.
For a mixed sex couple who have not married because they do not want to buy into the ‘cultural baggage’ of marriage, the answer may well be yes: once the legislation is enacted they will have a way of legally formalising their relationship without marriage.
A couple who positively do not want either to marry or enter into a civil partnership are still where they always were.
The important change is for couples who have either not realised the vulnerability of the survivor or who feel that, although marriage is not the right option for them, they would be happy simply to formalise the legal relationship by way of a civil partnership.
These couples will be able, if they wish, to ensure simply by entering into a civil partnership that the surviving partner does receive a share of the property of the partner who has died, thus preventing it passing direct to the children which can lead to major practical problems.
Of course they can already achieve that with a well-made will. The key thing that a civil partnership will enable them to do is get the 100% inheritance tax exemption available to married couples.
All those affected need to remember, however, that until the legislation is passed and they have actually entered into a civil partnership, they continue to face the same problems as they do now, and they need advice on how best to mitigate them.
So is this at last recognition for the ‘common law marriage’? Not at all. Indeed the availability of either civil partnership or marriage equally between same sex and mixed sex couples only underscores the weak position of those who cohabit without taking good advice both as to the wills and the tax planning that they need to avoid the tragedy of an unexpected death becoming a practical financial and property nightmare.
To learn more, go to Five bad reasons to put off making your will