Diary of a private client practitioner: 13th June 2023

When it comes to families, is blood thicker than water?

These days, families are very complex – and getting more complex by the minute. Estrangements, step-families, fostered or adopted children. The list goes on and on and on…

How often do families come to see us (or our colleagues) having made their wills (or not even having made their wills) thinking that it is unlikely that their loved ones – usually their surviving spouse or children – will argue over what they leave after they die? The high risk of this strategy is not seen even after they have chosen to leave their estate in unequal shares, or their assets to go to one beneficiary with the direction that they will see that “other” family members will be provided for after they have gone.

So far, my favourite is where the deceased has told a friend what her wishes were, and scrawled down who should be left figurines and jewellery she owned, and felt that this was enough to ensure that they were received by those she wished after she died. She felt that it was enough to make a will, or at least show what she wanted before she died.

If only things were this easy! However, money seems to do weird things to people, especially when family members believe they are not getting a fair share when compared with others, or they receive less than they perceive they are entitled to. Add into the mix that someone may not recognise that when they are unmarried/not in a civil partnership, and their loved one passes away, that there is a legal distinction with those cohabiting couples. How many times have you had to explain to people that:

  • “Common law marriage” isn’t a thing?
  • Whilst they have been with their partner for decades – which is longer than a number of marriages last these days – they haven’t got the same rights; or
  • You don’t have the same rights as someone who is married or who has formed a civil partnership.

There seems to be a move away from marriage and civil partnerships. Marriage rates are estimated to fall by 70% by 2062. In contrast, couples cohabiting is on the rise (in a big way). It is now estimated that around 25% of couples are cohabiting, with that figure having increased by 144% between 1996 and 2021. This figure is only going to increase in the years to come. Whilst there are wider implications for the distinction between cohabiting couples, and those that are married or who have formed a civil partnership, in our area of law, these have a vital difference:

Cohabiting Couples Married/Civil Partnership
Ø  Under the intestacy rules, a cohabitee has no automatic right to inherit anything from their loved one unless there is jointly owned property;

Ø  Can only bring a claim for reasonable financial provision if can show that they were cohabiting as “husband or wife” for two or more years or can show the deceased provided for them immediately before death under the Inheritance (Provision for Family and Dependants) Act 1975;

Ø  Limited to inheritance tax threshold of £325,000 when cohabiting partner passes away;

Ø  May need to consider a trust claim to show a beneficial entitlement to the property if legally owned by the other, or where jointly owned and considered entitled to more;

Ø  Not entitled to be supported by the cohabitee financially on breakdown of relationship, unless there are children;

Ø  Sometimes, couples living together aren’t recognised as being next of kin. This is usually dependent on the organisation you are dealing with;

Ø  Where there is joint property, this is owned by the person that purchased it, unless it was brought by joint funds or joint account where the assets are considered to be owned jointly; and

Ø  Personal pensions may not allow for persons not identified as the spouse/civil partner. If they do, would need the deceased to have competed an expression of wishes form. Pension is likely to not continue on death of the cohabiting partner.

 

 

 

 

 

 

Ø  Where a valid is will made before marriage this is set aside by the marriage, unless the will was made in contemplation of marriage;

Ø  Where no valid will was made, a spouse/civil partner has priority to inherit over other classes of beneficiaries under the intestacy rules;

Ø  As spouse or civil partner, you can bring a claim for reasonable financial provision at a higher rate – whether or not funds needed for maintenance under the Inheritance (Provision for Family and Dependants) Act 1975;

Ø  Tax advantages: assets transferred between spouses or civil partners can usually occur without any tax implications, such as capital gains tax; inheritance tax threshold is for both partners to the marriage/civil partnership, rather than a single allowance of £325,000;

Ø  Entitled to financial support from the spouse/civil partner, even where no children. If the partner won’t support the other, can go to the court to obtain an order for them to support you;

Ø  Both parties to the marriage are entitled to stay in the family home until either there has been a divorce, or the court has ordered one partner to leave – this is regardless of who brought the property, who has the mortgage on it, or whose name a tenancy agreement is in;

Ø  If your partner is the sole owner, you will need to register your home rights in order to protect your interests. It can help to prevent others selling the home or making you leave if its sold;

Ø  Next of kin, usually recognised by hospitals, and other organisations, generally recognise spouses/civil partners and close blood relatives as next of kin;

Ø  Assets held by both parties are usually considered as “matrimonial” property when arriving at a divorce settlement. This could include property owned before you were married; and

Ø  Occupational pension schemes must offer equal benefits for husbands, wives, and civil partners. Pensions may continue after death of spouse to be paid out to the survivor.

 

This year, I (and I am sure many others) had hoped that the government would look to tackle this issue head on, and not kick it into the long grass, especially when the consultation on cohabiting couples took place in 2007, and the likelihood is that views have changed in the intervening period already. Unfortunately, this was not to be, and the government has opted to finish the existing work and changes underway to the law on marriage and divorce, before looking at issues concerning cohabitants.

It seems that before anything further happens in this area, a further consultation will need to be issued, and that appropriate discussions take place before it is back on the government agenda. This seems to be such a shame, particularly as the law should reflect the changing make up of society.

So, it seems that claims arising under the Trusts of Land and Appointment of Trustees Act 1996 (and in some cases, claims arising in proprietary estoppel) are set to continue, with the Courts continuing to intervene and deal with some of the knottier claims that make it through on a more regular basis. It is our clients that are having to put their hands in their pockets to (hopefully) get what they feel they are entitled to when their relationship deteriorates, or (in some cases) clarify the “grey” areas that have arisen because it is not covered within the scope of current legislation. This seems all the more relevant given the recent decision by the Court of Appeal in Hudson v Hathaway [2022] EWCA Civ 1648.

Hopefully in the future, the government will be bold and take steps to fully appreciate the extent that this is impacting on our clients, and the extent that change is required. For now, it looks like any change is not going to happen for at least a few years (at least)…

 

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