Marriage v Cohabiting – Should It Make Any Difference?
Lawyers are often haunted by the spectre of the common-law spouse. Clients believe in them and think that after you have lived together for long enough, the law will treat you as a married couple. Actually, it won’t and the common-law spouse is as real as the tooth fairy.
But is that desirable? Should people who live together ‘earn’ the same rights as married couples? If so, should it be on a ‘time-served’ basis or should it make a difference if you have had children together? What about step-children, should their existence change things again?
What about people who deliberately don’t get married because they dislike the idea of legal ties and public commitments? Should they have those ties forced upon them against their wishes? If so, how could they avoid it?
Currently, married couples, which includes registered civil partners, receive tax benefits. For example they can pass unlimited amounts of wealth to each other during their lifetimes without triggering a charge to capital gains tax and they can leave each other an unlimited amount through their wills without any charge to inheritance tax.
Married couples are often treated more favourably by pension companies – they can leave a widow or widower’s pension to their spouse upon their death. If you live together without marriage you miss out on these advantages – which may leave you significantly worse off.
However, the biggest difference between married couples and cohabitees is how they are treated on death. If you die intestate (without a will) then the law sets out who will inherit your estate – and how much.
If you are married with no children, your spouse will inherit property owned as joint tenants, your chattels and the first £450,000 of your estate. Anything left over will go to your parents (if they are still alive) and if not then to siblings and so on through your blood line – relatives of the whole blood taking precedence over relatives of the half-blood.
If you are married and have children (regardless of whether they are children of the current or a previous relationship), then your spouse will still inherit joint property and chattels, but they will receive the first £250,000 of your estate. Anything left over will be divided in half – the children will receive one half between them when they reach the age of 18 and the income from the other half will go to the spouse during their lifetime and upon the surviving spouse’s death, the capital will then pass to the children.
Now, if you are cohabiting and you die without a will – and it is estimated that only 30% of adults do have a valid will – then your cohabitee will receive anything owned as joint tenants (including real property, but NOT property owned as beneficial tenants in common; there are two ways of owning property jointly and they have a very different effect on death). The partner will receive nothing else at all.
If a couple have been living together for two years or more and the deceased was domiciled in England and Wales, the surviving partner could make a claim for a greater share of the estate under the Inheritance (Provision for Family and Dependants) Act 1975. However, this means that the partner will effectively be suing their late partner’s family – including children. Apart from the expense and risk of litigation, this is extremely distressing at an already difficult time.
The Law Commission has recently consulted the public about changing the rules of intestacy so that, amongst other things, cohabitees can automatically inherit from each other.
The proposals are that where cohabitees have a child together, the surviving partner should have the same inheritance rights as a spouse. Where there is no child of that relationship and the cohabitees have been living together for five years or more, then the surviving partner has the same inheritance rights as a spouse.
If a couple have been cohabiting for between two and five years, it is proposed that the surviving partner should automatically receive half of the spouse entitlement, possible with lesser rights to chattels in recognition of the surviving family’s desire to receive some personal items.
However, if either partner already has a spouse – for example where they have separated but not divorced – then that spouse will still inherit and the cohabiting partner will have to make a claim under the Inheritance (Provision for Family and dependants) Act 1975 as before.
You could argue that the Law Commission are trying to bring our inheritance laws into step with modern life and that cohabitees should have more legal status than they currently do, but are these proposals the right answer to a difficult question?
The obvious point is that anyone unhappy with how the law will direct their estate should put a will in place – which would ensure that their wishes were at least known (wills can, of course, be challenged) but that is a counsel of perfection.
To find out more about the initial feedback to the consultation process, or to make your views know via a late response, visit the Law Commission website
For more information please contact Tamara Hasson on 01823 625615 or email tamara.hasson@footanstey.com
Friday, 12 March 2010
