Have you any rights?

The late twentieth and early twenty-first century has seen the dramatic rise in unmarried couples living together in a long-term relationship. Marriage is seen by many as an outdated institution that is no longer relevant in today's society. However, there is an area where being married can have a huge financial impact, and this is upon death.

On death, the rights of unmarried partners are completely at odds with those of a married spouse
or civil partner (spouse hereafter refers to either).
A married spouse is entitled under the intestacy rules to the deceased's entire estate if there are no children. A spouse has the highest rights to provision from an estate in an Inheritance (Provision for Family and Dependants) Act 1975 claim.

They are entitled to 'provision as it would be reasonable in all the circumstances of the case for a husband or wife to receive, whether or not that provision is required for his or her maintenance', as opposed to provision that is reasonable for the applicant's maintenance which is the entitlement of
all other claimants.

Between spouses (provided both are domiciled in England and Wales) there is no inheritance tax (IHT), meaning that on death, an entire estate can pass to a surviving spouse without any IHT. The nil rate band (currently £325,000) is transferable between spouses, so any unused amount can be utilised on the death of the second spouse. The proposed additional rate nil rate band for the family home will be available to those with children, if the rules come into effect as planned, from 6 April 2017.

In their lifetime, spouses can take advantage of the 'no loss, no gain' rule for capital gains tax (CGT), meaning they can transfer asset between themselves without fear of a CGT bill.

What, no rights?

An unmarried partner has none of these tax breaks. On the death of the first partner, their estate (if it exceeds £325,000 after any available exemptions and reliefs) will be subject to IHT at 40 per cent. There is no ability to use the transferable nil rate band. They will only be able to take advantage of the forthcoming additional rate nil rate band for the family home, if they have children or other direct descendants.

If one unmarried partner dies intestate, the surviving partner has no rights under the intestacy rules and would have to bring a claim under the 1975 Act, but only if they can show they have been cohabiting for a period of two years immediately prior to the death, unless they can claim as a dependant.

The unfairness of it all has not gone unnoticed with endless commentators discussing the issue, but the law has still failed to catch up. I recently dealt with a case where the deceased considered his other half his soul mate, but just did not believe in marriage. He died suddenly, leaving his partner facing a huge IHT bill. The family home was at risk of being sold to pay the bill.

Clearly marriage is not for everyone, but where couples do decide to cohabit long-term, an awareness of these issues will certainly help to ensure the right measures are put in place.

For example, on buying a property with a partner, consideration should be given to how a property is held; joint tenancy or tenancy in common? Should there be a declaration of trust, dealing with how much each partner put in so as to avoid a dispute on how much each is entitled to on death, if the relationship breaks down?

Equally, a will is of vital importance. However, it should be remembered that unlike a divorcing couple, if you break up with your unmarried partner but fail to amend your will, they could still inherit on your death.

Obviously the law in this area is complex, but at present, there is little protection for unmarried cohabiting couples in comparison with the tax breaks and rights afforded to married partners, so unmarried couples should be aware and do what they can to preserve their position in life and on death. 

Caroline Cook is a senior associate at Wedlake Bell

She writes the regular comment on inheritance in Private Client Adviser