Government rejects inheritance reform for cohabiting couples

Cohabitation|June 13th 2014

The government has rejected recommendations to amend the rules governing inheritance for cohabiting couples.

The current rules state that, unless a valid will is made, unmarried couples living together have no automatic inheritance right to their partner’s estate even if they have children.

The Law Commission proposed the Inheritance (Cohabitants) Bill in order to rectify this issue.

The proposed bill would have given partners with no children who had lived together longer than five years the right toautomatically inherit money or property following the death of their loved one.

For partners with children, it would only be two years living together before they were automatically eligible for inheritance rights, provided the child was living with them at the time one partner died.

The proposed bill was part of a series of recommendations made by The Law Commission to update the Inheritance (Provision for Family and Dependants) Act 1975, which has not been comprehensively reviewed for 20 years.

The aim of the recommendations was to make it easier for families to claim inheritance in cases where a will had not been made.

Several of the Commission’s recommendations were taken on board by the government to form the Inheritance and Trustees’ Powers Act 2014, which received Royal Assent on the 14th May.

The Inheritance (Cohabitants) Bill was drafted as an addition to the 2014 Act, but is not going to be implemented by the current parliament.

As a result of this decision, it is still vitally important that cohabiting couples make a will in order to make sure their loved ones are adequately provided for.

They should also consider the tax implications should one of them die and leave an estate valued at over £325K, which is the current Inheritance Tax threshold.

When one half of a married couple dies, their estate will pass to the surviving spouse without attracting any charge to Inheritance tax at all. Couples who live together do not have that advantage, so in order to receive any inheritance they will have to pay for it.

So what can cohabiting couples do? One possible avenue to explore is taking out life cover over the possible tax bill. There are also other avenues to consider to take full advantage of the £325k threshold and annual lifetime exemptions.

Of course, if there is no will made, they can claim for financial provision under the Inheritance (Provision for Family and Dependants) Act 1975, although they will still have to prove that they are a dependant of the deceased partner.

In these circumstances, it is in the discretion of the court how much they will receive balanced against the claims of those people who have inherited the estate. Usually this means the cohabitant will have to contend with the first family of the deceased. It means bitter arguments and the potential to deplete the estate due to legal costs.

Although the proposed legislation would not have obliterated litigation between dependents and family members, it would have been a step forward to avoiding litigation and unfairness in some cases.

Presumably, the reason the current government will not adopt the proposed change to make the process automatic for qualifying cohabiting couples, is because they do not want to give any form of legal comfort to cohabitees. If they did allow this change, the argument for expanded cohabitation rights between qualifying couples whose relationship breaks down only gets stronger.

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  1. Andrew says:

    There is a very long- established mechanism for allowing one cohabitant to inherit on the death intestate of the other.

    It’s called marriage.

    • Aaron says:

      And what if they can’t get married. Maybe one partner is already married and can’t get a divorce. A divorce through Separation takes at least two years (5 if the other party doesn’t consent). A lot can happen in five years.
      What if married couple (no assets – lived in rented house) split up – he simply walks out one day (It happens a lot). Wife meets another man a few months later and moved in with him.
      They can’t marry. Four years pass, and sadly he is killed . If he dies intestate she gets nothing.

      • Luke says:

        Aaron, marriage is a contract – if you can’t get married you make another contract – it’s called a will. there is nothing stopping anybody sort out their affairs – allowing the courts to make that decision based on presumption is a horrible idea.

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