Despite growing calls for cohabiting couples to be recognised in law in the same way as married couples or civil partners, there remains a strong disparity between these groups in the context of tax and estate planning. What is not often appreciated, though, is the effect that this disparity has on cohabitees when it comes to passing on their assets after their lifetime.
Cohabitation can mean various things. It could be a long-term relationship where assets are often owned jointly, or it could be a relatively new relationship where assets are more likely to be owned individually and the couple may live in a property that is actually owned by just one of them. If the partner who owns the property dies, can the survivor stay in the property? What rights do they have, if any?
Aside from property ownership, a common problem in this area is where inheritance tax is an issue as there is no equivalent of the spouse/civil partner inheritance tax exemption available to cohabitees. There could, therefore, be a large tax liability that needs to be paid. Will this put a financial strain on the survivor?
Another aspect which requires careful consideration and planning concerns children, particularly where one or both cohabitees has children from a previous relationship. Making a Will can provide much-needed clarification and peace of mind about who is going to inherit and how this might be done in the most tax-efficient way.
Until the law is updated to allow cohabiting couples access to the tax reliefs and exemptions that are already available to married couples and civil partners, it is important to seek advice now in order to avoid any unpleasant surprises when one cohabitee dies.
If you think that this might affect you or, indeed, your adult children or someone else in your family, please get in touch with our Private Client team who would be happy to discuss your particular circumstances with you.
Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.