The Government’s decision on 1 November to reject key recommendations for cohabitation law reform by the Women and Equalities Committee (House of Commons Select Committee) highlights the importance of taking specialist family law advice for couples living together who are not married or in a registered civil partnership.
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Secure PaymentIn August, the Committee recommended cohabitation reform in England and Wales to better protect cohabiting couples and their children from financial hardship in the event of separation and death. The Government rejected a key recommendation to establish an opt-out cohabitation scheme. Additionally, it has stated that it has no plans to extend the inheritance tax treatment of spouses and civil partners to cohabiting partners, but would keep it under review.
With no prospect of cohabitation reform in the near future, the BBS Law Family Team has the following important information for cohabitants:
- Be aware of the tax disadvantages of living together as a consequence of various tax allowances being unavailable to them in contrast to being married or civil partnered
- If the relationship breaks down, the biggest source of contention is likely to be the ownership of the home they shared
- A cohabitant has no automatic rights to their partner’s estate, making wills especially important for cohabiting couples
- Inheritance Tax is potentially levied twice, firstly on the death of a partner, and secondly when the surviving cohabitant leaves the estate to their children
- Cohabitants lose the tax break on their cash on inheriting their partner’s ISA investments
- The lack of a “survivor’s” pension for cohabitants can mean that claims are not made under defined pension death benefits
To claim better protection, we advise cohabitants to speak to us to consider the following pro-active steps:
- Enter into a cohabitation agreement which sets out who is entitled to what if the relationship breaks down
- When buying a home together, couples may wish to enter into a declaration of trust which sets out in what shares the property is owned
- Making a Will, which is the best way to ensure that bereaved partners and their children obtain their fair shares in the event of a cohabitant’s death
Taking action is almost always better than doing nothing in this situation.
Please contact our Family Law Team for bespoke legal advice on cohabitation, our Property Team if you are buying property, and our Private Client Team to protect wealth and achieve tax efficiency.
