You may have heard the phrase “common law” spouses being thrown around and it is often used by or in relation to couples who effectively live together as a married or civil partnership couple. There is a common misconception, however, that by living in such a manner, the same rights and benefits enjoyed by married and civil partnership couples also extends to unmarried couples. This is not quite true when it comes to estate planning and death.
How do my assets pass when I die when I am not married?
The assets owned in your sole name will pass in accordance with the rules of intestacy. The intestacy rules govern the administration of a person’s estate where they have died intestate, that is where no valid Will in place or where the Will doesn’t deal with all of the estate (partial intestacy). The order of entitlement to your estate very much depends on the value of your estate on death and which of your family members have survived you. Of those family members who have survived you, those with the higher the degree of kinship will be entitled to share in your estate first at the exclusion of those in the lower categories. The list will start off with spouses, then children and so on.
What about my assets I own jointly with my partner or other parties?
Joint assets can be held in one of two ways, as tenants in common or as joint tenants. There is a subtle but important difference between the two, which could entirely change how assets pass on death.
Any assets you own jointly as tenants in common, mean the co-owners have a specific share in the asset. Each co-owner’s share will also pass under the rules of intestacy (if there is no Will), an unintended consequence of which on death may be that an asset is then owned by several members of the extended families from each deceased co-owner.
Jointly owned assets held as joint tenants, which is where the co-owners collectively own the whole asset, will pass automatically to the surviving co-owner(s), which may or may not necessarily be what you would want to happen.
The way in which a joint asset is held can be changed to the other and we can prepare the necessary documents to put this into effect.
Can my partner dispute the intestacy rules?
The rules are fixed. However, they may be able to bring a claim against the estate for inadequate provision under the Inheritance (Provision for Family and Dependents) Act 1975. As you will appreciate, the effect of losing a loved one is bad enough as it is but to then find out that you, as a partner, have not been adequately provided for under a Will or that you aren’t a listed next of kin under the intestacy rules, will cause shock and no doubt distress at an already upsetting time. There are specific criteria under which a claim can be brought and time limits in place to bring a claim. Please contact Ashley Lacome-Shaw [insert contact link] in our Litigation Department if you wish to receive further advice on this.
Other issues to consider
As well considering whether or not your partner will have sufficient financial security, you will want to ensure that you have appointed guardians for any children you have who are under 18 in the event both parents have died.
There is no equivalent spousal exemption for inheritance tax purposes for cohabiting couples, so it would be prudent to also think about tax planning as part of this, to ensure your Will is structured in a tax efficient way.
A Cohabitation Agreement is an invaluable document that provides peace of mind and security to couples that have taken the decision to buy or live together. It is very important to remember that the legal system in this country still does not give cohabiting couples the same rights as married couples on separation. The only recourse available where a dispute arises is in contract law or complicated trust law, which can often result in an outcome that is unsatisfactory to one or both of the parties.
A Cohabitation Agreement enables couples living together to set out clearly in what proportions the property should be owned, what their respective obligations and responsibilities will be and what should happen in the event they should decide to separate. The Agreement can cover a wide range of different topics including the house sale, contents, personal belongings and household expenditure. The Agreement can also be used to set out how the couple will manage their day to day finances, mortgage contributions and how the children will be supported.
At Lyndales we specialise in the preparation of these bespoke agreements that are tailored to meet the specific requirements of your relationship at any stage before you move in or whilst you are living together.