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Address
The Will Bureau Ltd
5 Chase Side
London
N14 5BP

Telephone
020 8920 3360

Fax
020 8920 3366

E-Mail
info@twb.org.uk

Tax and Unmarried Couples

The UK tax and English legal system favour married couples. Assets and inheritance tax benefits can be transferred, and legal claims in disputes more easily satisfied for marrieds than unmarrieds.

Nowadays, most couples prepare for married life via a period living together, and provided the experiment works, marry and gain access to a range of fiscal and legal benefits (Note 1). Those benefits are not necessarily the motivation for marriage, but those who remain unmarried should be aware of some prominent examples of how the English legal system regards them!

As The Will Bureau (TWB) is one of the oldest estate planning firms in England Top of (the legal) Pops is the Finance Act 2008 that upon death allows a spouse to transfer inheritance tax (IHT) relief to the surviving spouse. The nil rate band (NRB) is not as easily transferable as the media suggests (Note 2), but at currently £325 000, is a significant fiscal benefit. Further, and dependent on the pension type, the trustees almost always automatically pays the pension to the survivor, who would probably have rights of residence in the marital home. Unfortunately, even if unmarried partners have lived together for many years, they receive few tax and legal rights. Consider the following:

•    Common Law marriage (contrary to popular belief) has not existed in England since 1753, and unmarrieds have few ‘joint property’ rights.
•    A surviving unmarried partner has no automatic rights of tenancy in a home solely rented or owned by a deceased partner
•    In the event of a dispute, personal property is not automatically legally shared between unmarrieds
•    Further, a partner can empty a savings account with impunity.
•    If unmarrieds with children, separate, the leaving partner legally only has to pay for the upkeep of the children and not for the partner caring for the children- only for the children
•    In the event of the death of the children’s mother, the father of a child born before the 1st December 2003 has no automatic rights of guardianship of the child

The above list is not exhaustive, but does indicate that unmarrieds indeed have fewer tax and legal rights; Next of Kin is another example!

If it’s a surprise that Common Law marriage does not exist, then that Next of Kin has no legal definition in English Law will probably be even more of a surprise. The convention is for doctors and hospital administrators to only share medical diagnoses and developments with immediate family and therefore a worried long term partner would potentially be excluded from access. TWB has years of experience making sure people’s personal wishes are comprised in Wills, and also offers a solution for unmarrieds of formal Next Appointment Letter. In addition to a range of trust and inheritance tax services, TWB also offers the following:

•    Next of Kin Deeds (NOK) that direct doctors and hospital administrators to give private information and access to a named partner
•    Living Together Agreements (LTA) that, in the event of a dispute and separation, describe how owned homes and personal property are to be shared
•    Wills that appoint partners as executors able to manage the distribution of a deceased partner
•    Wills that ensure the survivor has rights of residence or inheritance to the home shared by the unmarrieds
•    Wills also nominate guardians regardless of whether a father’s name is present on a birth certificate

The best action is clearly to get a Will supplemented with a NOK and LTA and for instance make sure all tenancies are in joint names. Failure to take such action could make homeless the partner of a deceased person, and simply enrich the Crown (which is the ultimate recipient of all unclaimed property for which a member of the family is not found).

The best action is therefore to get advice from TWB

Notes
1. Some couples chose not to marry. For those people who cherish their independence as well as their unmarried partner, a recent court case may make marriage attractive! In July 2009, and for the first time in English Law, the Court of Appeal held that prenuptial agreements were admissible. The case has since been referred to Supreme Court (ex House of Lords) and within the month, a decision that could cement the prenup into English Law is due.  
2. The nil rate band (NRB) is not as easily transferable as the media suggests. Inheritance Tax (IHT) is payable on the second death, which may be some years after the first death. To claim the NRB, the executors, who are often lay people, have to complete a range of non standard forms, and show the HMRC the gifting of the first death in the 7 years prior to death, did not reduce his or her entitlement to the NRB. In short, documentary evidence from many years prior has to be produced to substantiate the claim.