One common myth could land couples with a huge unexpected tax bill, according to leading lawyers.
Couples in long-term unmarried relationships could be faced with an unexpected inheritance tax bill, or loss of assets, due to a common misconception they have the same protections as married couples or civil partners.
Lawyers are urging couples in common law marriages to review their financial arrangements before the new tax year in April to avoid any shock bills.
As family lawyer James Myatt explains, if one partner dies, the survivor is not automatically entitled to their assets like married couples, and their estate will go to the legal next of kin instead.
Even if they own a house together, the deceased’s share could go to the next of kin, meaning surviving partners may have to sell their half of the house.
Any assets left to the survivor will likely also be subject to inheritance tax, potentially at 40%, unlike in a legal marriage or civil partnership.
The partner at Shakespeare Martineau law firm said: “While we’re not telling people to rush off and get hitched, we are warning against the myth of ‘common law marriage.’ Although a commonly used phrase, legally it has no meaning in this country.”
Government figures show 3.6 million couples registered as cohabitees in 2021.
He advised how cohabiting couples could prepare their finances without being shoehorned into marriage or a civil partnership.
Myatt said: “First, ensure that your will is up-to-date and names your partner as a beneficiary. Cohabitees are not legally considered next of kin and will not automatically receive anything upon their partner’s death.”
If a couple owns a home together and they are both on the title deeds for the property, he also advised considering the “survivorship destination”.
If one person dies, their house share is transferred to the other. Without this, their house share would be left to their legal next of kin.
He added: “This could result in the surviving partner being forced to sell or leave the property against their wishes.”
Myatt concluded: “While nothing apart from getting married or entering into a civil partnership will exempt your partner from paying inheritance tax, it’s important to make sure that legally you’ve made your wishes clear to limit confusion and ensure they receive everything you intend them to.”
