Do you cohabit? Your key questions answered:
Posted on 09 May 2019
Research now shows that cohabiting is the fastest growing family type in the UK (here). It affords the companionship of official family structures (marriage/ civil partnership) and the bond is as strong as the love between the partners. As Jodi Mitchell put it: “we don’t need no piece of paper from the city hall”.
However not all love is equal in the eyes of the law and cohabiting couples face legislative discrimination. Despite what people may think there is no such thing as a “common law husband/ wife”. There have been promises of review by the Law Commission for decades now but nothing has yet come of it.
This blog explores some of the inequalities between common-law relationships and marriage/ civil-partnerships and discusses some steps cohabitees can consider to protect their partners.
Credit: Kristina Litvjak
If a property is in the sole name of one of the cohabitees the remaining partner has no automatic legal right to inherit or even to stay in the family home if the legal owner dies. In the absence of a will the property will follow the rules of intestacy in which case the property may end up being owned by the deceased’s children, or Long Lost Cousin Bertie – who may or may not consent to the bereaved cohabitee staying in their home.
This can be the case even where the bereaved partner has been a homekeeper and invested significant time and resource making and keeping the home for decades. This heartbreaking problem is, in a large part, what inspired the creation of the makeawillonline.co.uk service.
Cash in the bank:
There are all sorts of reasons why the bulk of a couple’s cash might be in an account with only the deceased’s name on it. Similar to the above: this comes with all sorts of risks to the bereaved partner. In the absence of an “official” family structure the bereaved will have no access to cash, and worse still: the rules of intestacy may apply leaving the bereaved with no savings or financial security.
Death and taxes:
Where a couple is married or in a civil partnership the taxman allows a transfer of the deceased tax “Nil Rate Band” (currently £325k plus an additional sum for the main residence – see here for details). Where a couple is cohabiting they do not enjoy this benefit. This means that the surviving, bereaved partner is more likely to have to pay a considerable amount of money (up to 40%) just to keep what has been left to them.
Likewise: any gifts from the deceased to the surviving cohabitee given in the seven years prior to the deceased’s death could be liable for inheritance tax – something that would be mitigated if the couple were married or in a civil partnership.
Aside from putting scepticism about “official” relationships aside and one cohabitee “popping the question” and the other agreeing (hint: if you’re asking – don’t lead with a preamble about tax!) there are practical and legal steps that can be taken:
1. Make a will. Set out what you want to happen to any property that you own or live in. You can specify whether you want your partner to take ownership of any cohabited property or retain a right to live there for as long as they want/ can before it passing to others (e.g. children or family). Likewise, you can deal with other money and assets. You can make a will here.
2. Set your finances in order. Make sure shared money is in an appropriate account and speak to your financial advisor/ insurer/ bank about life insurance, pensions, other investments.
3. Ensure the property is held as you want it to be. Do you own the property together? Speak to your solicitor about holding as “tenants in common” or “joint tenants” to ensure that what you expect to happen actually happens when one of you passes away. If you are “tenants in common” you can get a trust deed setting out what arrangements should take place if you sell/ split/ pass away.
4. Enter into a “cohabitation agreement”. This can set out how you deal with your assets during the relationship and at the end of it. It’s better to agree what should happen to money/ children/ property before the arguments start. You can speak to a specialist family solicitor about this. A list of solicitors can be found on the Law Society website.