Over the years, I’ve encountered many couples in a relationship spanning 20 years or more, often with children together, who have never married nor have any intention of doing so. When challenged as to reasons for not marrying, there’s rarely expressed any aversion to marriage in principle. It’s just “we’re happy as we are; we don’t need a piece of paper to prove the strength of our relationship”.
Marriage is, of course, a legal relationship that’s much more than a ‘piece of paper’ and while ‘marry in haste; repent at leisure’ remains as good advice as ever to a young (or not-so-young) couple in the first flushes of romance, for couples in a mature, long-term relationship, marriage (or civil partnership) makes much legal, practical and financial sense. And while, in the rest of this blog, I refer to marriage, the same rules/comments apply to civil partnerships.
Death…
If your long-term partner dies, the starting point is that, if you’re not married to them and there’s no Will, you inherit nothing. If your partner leaves children, those children will take the whole estate. If there are no children, everything will pass to your partner’s parents, siblings, or other family members under the Intestacy Rules. You’ll be left trying either to argue that some of the assets in your partner’s sole name were actually jointly owned or to bring an action for reasonable financial provision (for your 'maintenance' and no further) under the Inheritance (Provision for Family and Dependents) Act 1975. Not only might you be suing your own children, but a fair chunk of your partner’s estate will be disappearing in legal fees.
The solution to these issues is simple. Unless all the assets are in joint names and pass automatically to the survivor on death, both of you should visit your solicitor and make wills.
It’s fair to say that the Intestacy Rules rarely work perfectly when a couple is married. A set of rules necessarily designed to be 'one size fits all', rarely fits any family circumstance very well.
If you’re married and there are no children, you’ll inherit everything- and the whole estate, however large, will be free of Inheritance Tax (IHT) by reason of the “Spouse Exemption”. If there are children and the deceased’s estate is worth more than £250,000, half of what’s left over will pass to the children. If the share passing to the children is worth more than £325,000, there may be IHT to pay.
If your children are adults, they may be happy to enter into a deed of variation to redirect the whole of the estate to you. Both IHT and, possibly, consideration of your need to bring a 1975 Act claim will be avoided. If the children are under 18, neither they, nor family members acting as trustees for them (however amenable to your position), can legally agree to a deed of variation. If your share of the estate is insufficient for your needs, there’s no alternative to bringing a 1975 Act claim.
… and Taxes
From almost every tax angle, marriage is 'good news'.
If you’re married and leave everything to your wife/husband, the estate is IHT free. When she/he dies, leaving everything to the children, two nil rate bands (and possibly additional residence nil rate bands) will be available before the balance of the estate is charged to tax at 40%.
If you were unmarried and leave everything to your partner, IHT will be payable on your death and then, again, on his/her death. HMRC will, indeed, be ultimately the principal beneficiary of your estate
Marriage can save a couple literally millions in IHT. Many marriages take place just before a partner’s anticipated death for just this reason. The comedian Ken Dodd’s marriage to his long-term partner, Ann, just two days before his death in March is reported to have saved £2 million in IHT.
And remember, while having assets in joint names may remove the need for a Will, assets passing by 'survivorship', if you’re not married, will also be liable to IHT when they pass to your partner on your death.
From a Capital Gains Tax (CGT) perspective, any transfers between married couples are tax neutral. This can be useful (and profitable) in making sure each party can make full use of annual and other CGT exemptions. Income producing assets can be transferred tax-free from one party to another so that, perhaps, the benefit of lower income tax rates can be enjoyed.
Where a couple is unmarried, any transfers between the partners might themselves be liable to CGT and retrospectively caught for IHT if made within seven years of death.
The other “D” word
Call me old fashioned and naive, but I’ve a tendency to assume that a person with whom you’ve been living for 20 years and with whom you have three children has put in enough time to shake off the mantle of suspected 'gold digger; out for what they can get'.
If you’re married and you split up then the Courts have a pretty free hand as to the division of the matrimonial assets (whichever name they are in) and, yes, the starting point will be the assumption of a 50:50 division. But that’s the law endeavouring to be fair, not a punishment for having married and now divorcing.
And yes, if you and your partner are unmarried, your children together are all grown up and independent, and you’ve been careful to keep all assets in your sole name, then there’s no power for the Court to order you to share your assets with your partner if you split up on the basis of need and fairness.
He or she will need to argue a contribution in money or money's worth has secured an interest in those assets - the law is neutral, but a judge may nevertheless be sympathetic to your partner’s position. My own view is that it’s only a matter of time before an attempt to give formal legal structure to co-habitee rights (on separation and death) finds its way onto the statute books.
