Cohabiting couples and inheritance

A question which unmarried couples should ask themselves is have they considered what happens to their Estate when they die, especially if they haven’t made a Will?

When you make a Will, you set out your final wishes as to how you would like to see your wealth and assets distributed, and who looks after your children, pets etc. Wills also cover other points such as whether you would like to be buried or cremated. When you die Intestate (without a valid Will) you leave a lot of uncertainty for loved ones at a very difficult time for them and it can cause disputes between them.

The Intestacy Rules do not make provisions for unmarried partners or those not in a civil partnership. The Intestacy Rules are complex, and you might be surprised by which family members could have a claim on your estate.

The Intestacy Rules entitle your spouse (if you are still married) to the first £270k of your estate with your children entitled to half of the rest and the remaining half to your spouse. On top of this, there might be Inheritance Tax (IHT) to pay on assets passing to the children. This can be especially complicated where there are children from previous relationships or even those whom the deceased has lost touch with.

For unmarried couples who own a home jointly, it will depend on how the property is held as to whether they will inherit their partner’s share. If the property is held as beneficial joint tenants at the time of the death, then the surviving partner will automatically inherit the other partner’s share. If it is held as tenants in common, the surviving partner does not automatically inherit the other person’s share.

Depending on the value of the deceased’s whole estate, there might also be Inheritance Tax to pay and that may mean the surviving partner has to sell the property to settle the IHT bill if there are no other available assets.

If an unmarried couple has a joint bank account, then the remaining partner will automatically inherit the whole amount when the first partner dies. Again, there might be IHT to pay depending on the value of the whole estate, as there are no tax-free allowances on assets passing between unmarried partners.

For other assets such as pensions, life insurance etc. it will depend on whether the asset is nominated, as to whether it will be included for IHT purposes which is why it is important to keep this information up to date.

Most pensions are written under a form of trust so typically fall outside of a persons’ estate for IHT if they are nominated to someone.

Unmarried couples are also reminded of the importance of appointing a guardian in their Will for their children or stepchildren.

A legal guardian can only be appointed by someone who has parental responsibility for the child (which might not be the person they live with). If you do not make a Will or have parental responsibility for the child, then the court will appoint someone on their behalf.

Children are not entitled to receive or accept a share of an estate until they reach the age of 18. Typically, if they are left something in a Will then provisions will be put in place, usually a Bare Trust, to look after their inheritance until they reach 18.

Where there is no Will, it will be the person with parental responsibility for the child who will be entitled to take control of the inheritance on their behalf until they are old enough to take the money for themselves.

When you make a Will, you will appoint a suitable person over the age of 18 to act as the Executor of your Will and they can be a Trustee over any Trusts within your Will or arise because you have a beneficiary who is under the age of attainment. You might choose to appoint a professional such as a solicitor to be the Executor and Trustee, and then separately appoint family members to be a guardian for the children. You can, however, appoint the same people to be Executors, Trustees and guardians of any minors.

Where a parent dies and there is no one with parental responsibility to look after their children, then the court would decide what is in the best interests of the child. The age of the child will determine how much of a say the child has in this process.

The Intestacy Rules clearly set out what happens to your Estate when you die and the procedure which is followed, but this is unlikely to reflect some of the complex family relationships people now have. It also doesn’t take into account any familial relationships you may have through marriage/re-marriage or reflect who has been close to you in your final years. For example, a niece by marriage who cares for an elderly uncle would not be entitled to a share of his estate if he died without making a Will.

Ultimately, and in rare circumstances, if you have no beneficiaries and die without making a Will and no surviving heirs can be traced (which is time consuming and costly) then your Estate passes to the Crown and the Treasury Solicitor will have control of the management of your estate.

Francesca Hayward is an Associate Solicitor at Gullands Solicitors T: 01622 689700.