The majority of cohabiting couples could be leaving their partner unprotected when they die by not leaving a will, as 55% falsely believe the concept of ‘common law marriage' provides the same rights as married couples.
Research carried out by Advicenow as part of the organisation’s LivingTogether campaign, reveals cohabiting couples could be in serious trouble if they don’t prepare for the future, providing a possible business opportunity for advisers.
The findings show 60% of couples haven’t made a will, yet it points out 41% of those without a will say they would want the majority of their property and assets to pass to their partner if they died, when in reality, their estate would pass automatically to their next of kin, and their partner could be left with nothing
Meanwhile more men, 47%, than women, 35%, in cohabiting relationships don’t have a will but would want their partner to inherit, while 27% of those living in a home owned solely in their name, and 42% of those who are the primary wage earner have all failed to plan for the future and make a will.
It says the problem is largely a result of the continued misunderstanding around the legal rights of couples who live together outside marriage, as the study of 1,004 people, conducted by BMRB, shows 55% of people still wrongly believe in ‘common law marriage’ – the idea that cohabitants gain rights similar to those of married couples after a period of time.
Instead Advicenow points out if a cohabitant dies without making a will, their surviving partner will have no automatic right to any of their property, possessions or money, with everything passing to the nearest blood relative, even if it is known this is against the wishes of the deceased.
In addition even if a will is made and property passes to their partner, a cohabiting couple will not qualify for the spousal exemption from Inheritance Tax (IHT) available to married couples.
Mary Webber, cohabitation expert at Advicenow, says cohabiting couples do have to pay IHT on anything passed between them if the estate exceeds the tax threshold, and in contrast to what many people believe, this includes a partner's share of property that is owned as joint tenants, as this passes to the co-owner, rather than according to the will.
She adds: "This is a very important issue as it's something most people do not think about and yet, with rising house prices, it is something which affects more and more couples. It is particularly a problem of course for those couples who own the home in one partner's name."
As a result Advicenow says more needs to be done to “debunk the myths”, and make sure people living together, currently more than four million in the UK, plan properly for the future, by knowing exactly what their inheritance rights are.
Although a consultation paper by the Law Commission, which closed on 30 September, set out possible changes giving cohabiting couples with children the same rights as married couples, no further decisions have been made on this issue.
And Webber warns people risk leaving their loved ones in extreme hardship, and emotional distress, either by assuming they will have automatic rights, or by believing the worst will never happen to them.
As a result she says the organisation, which is an independent, not-for-profit website providing accurate, up-to-date information on rights and legal issues, has decided to launch a free-to-download guide, to help co-habiting couples understand inheritance rights.
Webber says: "The results of our research make for worrying reading. Unfortunately, we can never be sure of what lies around the corner, and the last thing a bereaved partner needs is to have to worry about being able to stay in the shared home, paying the bills, or being forced to hand their partner’s possessions over to someone else."
So she says anyone who might have IHT issues should make a will with the help of a solicitor, rather than on their own, as good advice will be able to help them think about how they should arrange their affairs to minimise any tax payable by their partner.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7034 2681 or email [email protected]IFAonline
Joined as head of strategy, multi asset, in June
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