Wills & Tax
We are constantly changing how we live and the people we live with has altered to. Many couples decide to live together without getting married or having a civil ceremony, and the ‘second family’ scenario is increasingly common.
Unfortunately, the law is not always quick to adapt to the evolving social structure and this is particularly highlighted when considering the ‘mechanics’ of how you are going to live together and how you are going to plan the future.
Co-habitees need to think about what is important to them, discuss the issues openly and agree how they are going to achieve their goals. The following are a few pointers to start that discussion process:-
We are common law spouses
There is no legal recognition of the concept of the ‘common-law spouse’. If one partner in a cohabiting couple either loses capacity or dies, the surviving partner will not be entitled to be automatically recognised as a next-of-kin or as someone entitled to a share of the estate.
It is therefore important for partners to discuss how they would like to be looked after in the future. This could be whether they suffer illness, whether it affects their physical or mental abilities, and would like to make decisions about what happens to their estate after they die.
I don’t worry about what will happen when I’m gone
It is important to remember that the children of an unmarried couple will have the priority call on the deceased parent’s estate, leaving the surviving partner the option of inheriting jointly held property and nothing else, or suing the estate (and therefore their own children) for ‘reasonable provision’ under the Inheritance (Provision for Family and Dependents) Act 1975.
This situation can be even more difficult where the children are from a previous relationship and old rivalries and inter-family tensions can be exacerbated at what is already a very difficult time.
My spouse gets everything...
Married couples (which includes civil partners) are in a better position than co-habitees in terms of automatic entitlement to an estate, but they don’t get everything.
Spouses also receive all jointly held assets absolutely as well as all chattels and then a minimum of £125,000 absolutely (rising to £200,000 if there are no children). The remainder of the estate is then divided in accordance with the intestacy rules which can result in gifts to parents or siblings etc which may not have been envisaged.
I’m too young to need a Will
Who will look after the children if you die young? Who will be in charge of administering your estate? Should I be worried about inheritance tax? What if I need residential care in the future?
You cannot afford to be complacent about what happens next; if you want to decide what happens to your family in the future you need to plan well ahead when the greatest number of options are available to you.
My partner knows what I want
Most people have views about the healthcare they would like to receive. This can be based on religion, culture, past experience or instinctive. Attitudes to medicine and issues such as prolonged life-support and artificial feeding vary and it’s important that those closest to you know what you would want. It is even more important that they have your authority to make those views known to any medical team treating you.
For a long time, Advance Directives (also known as ‘Living Wills’) were not legally enforceable but you can now record how you would like to be treated and appoint people of your choice to make those decisions for you – which may be very important if you are no longer able to communicate your wishes.
We keep our finances separate
If you couldn’t manage your money – is there someone who could? The Mental Capacity Act introduces huge changes to the Enduring Power of Attorney (EPA) regime, replacing EPAs with Lasting Powers of Attorney (LPAs). These will still enable you to appoint someone to manage your financial affairs on your behalf and this may be particularly useful should you lose the ability in the future.
The alternative process for where there is no EPA or LPA in place remains the receivership process which can be both lengthy and costly and relies on someone else deciding that they should look after your affairs. This may not be the person of your choice as the application is made by the party wanting to be appointed, rather than you. If you want to be the person who decides who is going to handle your finances during your lifetime then you need to put those arrangements in place sooner rather than later.
If you would like further information or advice about planning for the future please contact us.
