On 1 November 2022, the government confirmed that it will not change the law in relation to cohabiting couples until work underway on the law of marriage and divorce concludes. It also outlined it does not have plans to extend the inheritance tax (IHT) treatment of spouses and civil partners to cohabiting partners. It rejected recommendations concerning intestacy and family provision claims for cohabiting partners. But it did accept the recommendation that it should publish guidelines on how pension schemes should treat surviving cohabiting partners. 

This is even though cohabiting partners make up the fastest growing type of family, with over 3.6 million partners cohabiting in the UK. 

Legal advice for cohabiting couples

What does this all mean for long-term couples who are not married or in a civil partnership? 

Aside from popping the question to protect your partner, first you need wills!

Why you need a will when you're cohabiting partners

If you are not married, and one of you dies without a will (an ‘intestacy’), the survivor may not be entitled to anything from the deceased’s estate, even if you have been together for years and have children together. If you want your partner to benefit from your estate when you die, you need to write a will which says that. We can help you draft wills that ensure you provide for your partner on your death.

The Law Commission recommended in 2011 that it should be easier for the survivor of a cohabiting couple to benefit from their deceased partner’s intestate estate. But the government says as you are free to make wills during your lifetime to benefit your partner, you should do this instead. If you do not, your partner can make a claim against your estate using the Inheritance (Provision for Families and Dependants) Act 1975. However, this does not guarantee success.   

What about Inheritance Tax when you're cohabiting?

If you are married or in a civil partnership and you leave your whole estate to the survivor in your will, there is no IHT to pay on the first death, and your Nil Rate Band (NRB) of £325,000 rolls over to the survivor. The NRB is the value of your estate that IHT is not payable on (anything over that is taxed at 40%). Therefore, on the survivor’s death, their estate could be up to £650,000 before IHT is payable. 

On top of that, if you are leaving your family home to your children, there is the extra residence NRB of £175,000 – if you leave your whole estate to the survivor including the family home, your residence NRB also rolls over to them so that when they die, their estate could be up to £1million before IHT is payable. 

Couples who are not married or in a civil partnership don’t benefit from these tax breaks, so it is vital for them to incorporate IHT planning into their wills. We can advise you about this, as there is a range of IHT-smart avenues you can take.

Can a cohabiting couple benefit from each others pension?

Pensions are a grey area, varying widely from provider to provider – you might be lucky to get a dependent’s pension or a death benefit if your partner dies and you were not married but it is at the discretion of the pension trustees. It can take a long time to sort out what you are entitled to, which is not what you want when you are grieving. 

You can nominate someone to receive a death benefit or a dependent’s pension if you die but if you have not done this or if your nomination is out of date, the person you want to provide for could be overlooked for any support from your pension fund.      

So, if you don’t want to tie the knot now, or ever, but you do want to provide for your loved one, the best proposal you can make is, “Will you write wills with me?” 

We can’t promise you a happily ever after, but we can advise you on your wills and estate planning including Inheritance Tax Planning.

For further assistance and information, please contact us on 0113 320 5000 or email @email.