New laws proposed on inheritance rights for unmarried partners

15 December 2011

The Law Commission has just recommended reforms for intestacy law, where a person dies without leaving a valid will.

The existing law is currently confusing and outdated for up to two thirds of people who do not have a will, many thousands of whom die without leaving one. The Law Commission’s review of the existing law suggests there may be wide support for reform of the law relating to intestacy. There are already more than 2.3 million unmarried couples in the UK, which is set to rise to almost four million by 2033. Many do not realise that if one of the couple dies without leaving a will, the other will not automatically inherit.  While the Inheritance (Provision for Family and Dependants) Act 1975 does allow cohabitees to make a claim for provision against their partner’s estate if either they are not provided for in a will or their partner dies intestate, such claims can be difficult and expensive to pursue.

The draft Inheritance and Trustees’ Powers Bill includes reforms to simplify the sharing of assets and to ensure that assets pass on intestacy to the surviving spouse in all cases where there are no children or other descendants. This could, however, disadvantage parents of the intestate deceased child, which may cause hardship, especially if their child has only been married for a short time. Legal rules would also be amended which currently disadvantage unmarried fathers when a child dies intestate.

Furthermore, unmarried couples do not benefit from the “spouse exemption” for inheritance tax purposes. This means that any part of the deceased’s partner’s estate exceeding the inheritance tax threshold (currently £325,000) that passes to their surviving partner is taxed at the maximum rate for inheritance tax rather than passing inheritance tax free had they been married.

A separate draft Inheritance (Cohabitants) Bill has also been recommended which would give certain unmarried partners inheritance rights under the intestacy rules who have lived together for five years, or two years if they have a child together. Instead of relying on the intestacy rules, the child of such a couple would most likely make a claim for reasonable provision under the 1975 Act.

By drafting a separate bill, The Law Commission has ensured that the important debate regarding cohabitation reform is kept separate from discussions regarding their other recommendations.

In the absence of any immediate change to the law, and the undeniable fact that intestacy is no substitute for controlling your legal affairs on death, wills advice and tax planning remain essential for all to avoid the difficulties that can arise after someone dies intestate. Unmarried couples should also take specialist advice on inheritance. Please get in contact for more information including whether you benefit or lose out under the existing law and under the Law Commission’s  recommended reforms