Are you cohabiting? Do you consider yourselves common law spouses and partners? If so, then you should know that in England and Wales there is still no such thing as a common law spouse there is little or no protection for cohabiting couples that are not married or have not entered a civil partnership. There is some minimal protection under Scottish Law but not in England and Wales.
There are 3.6m cohabiting couples with little or no protection in this country. This is worrying and if you are in this position, you need to act today.
Legally Married of Civil Partners Rights
- Divorce: Legal rights to ‘financial remedy’ i.e., each to have their fair share of assets, liabilities, income, and pensions. This is handled in the Family Division of the English Courts system i.e., the Family Court.
- Death and Estate: All rights including no inheritance taxes on transfers between spouses or civil partners, allowances, gifting rules, transferring unused nil rate bands and private residence nil rate bands. Full protection when there is death without a will under intestacy laws, your spouse or civil partner will be the first priority on distribution of your estate if you die without a will.
- Capital Gains Tax and Income Taxes: All rights to transfer wealth and assets between each other without creating an immediate liability to capital gains tax. Full rights to transfer up to 10% of any unused personal tax allowance to your spouse or civil partner to save income tax.
- Pensions: Rights to share pensions on divorce, as detailed above. In addition, on death, surviving spouse and civil partner pension benefits can be paid as income as well as pension fund values can be paid to your surviving spouse or civil partner from defined contribution/money purchase pensions. Full rights to potentially enhanced state pensions on death of your legal partner.
Cohabiting or Common Law Partner – Very Limited Rights
- Separation: No legal right to a share of your former partner’s assets, income, or pensions. There is no right to ‘financial remedy’. For property and assets, you only have rights if you are a co-owner legally i.e., you both own a share of the property that you live in but if your partner solely owns the property, you have no rights.
- Death and Estate: No inheritance tax rights, no allowances, no transferring unused nil rate bands or private residence nil rate band rights. For property and assets, if you are a co-owner legally i.e., you both own a share of the property that you live in you have rights but if your partner solely owns the property, you have no rights. There is also some limited protection when there is death without a will under intestacy laws, your surviving cohabiting partner or common law partner may be awarded a small share of financial support if you have been living together in the last two years.
- Capital Gains Tax and Income Taxes: No rights.
- Pensions: No rights to share pensions on divorce, as detailed above. In addition, on death, no legal rights to a surviving cohabiting/common law partner pension benefit although some pension schemes may allow for cohabiting partners under their own scheme rules but there is no law to force pension schemes to do this. No legal rights to pension income and or pension fund values payable on death to your cohabiting partner unless you complete an ‘expression of wishes on death’ form for your pension fund to be paid to your partner and even then, payments are made at the discretion of the pension scheme trustees. No rights to potentially enhanced state pensions on death of your partner.
Lobby Groups and MPs Committee Report
There are many lobby groups including the Society for Trust and Estate Practitioners (STEP) that are lobbying for better rights for cohabiting couples and there is also now a ‘cross party MPs’ House of Commons Women and Equalities Committee looking at making things fair for cohabiting couples.
Committee Report: In August 2022, the Women and Equalities Committee issued a report with suggestions for the government to consider laws to grant rights for cohabiting couples for:
- Survivor’s pensions.
- Family financial provision.
- Former partner assets including pensions.
Rejected: The report was recently rejected by the government citing that they still had more works to do on married and civil partner rights before looking a cohabiting and ‘common law’ partner rights. The government also suggested that cohabiting couples already have options and should be making their own arrangements too.
Action if You are Cohabiting
If you love your partner and/or want to look after their welfare, you need to act right now.
- Make a will to include your cohabiting partner.
- Make all or some assets, including property, jointly owned.
- Consider setting up a trust for your cohabiting partner, even just life insurance in trust for your partner is a start.
- Check your pension scheme death benefits and complete expression of wish forms in favour of your cohabiting partner if you can.
- Consider legal advice and drafting a legal agreement for rights on separation. Like a ‘prenuptial’ agreement but call it a ‘cohabiting’ agreement.
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