Death and the unmarried couple: what happens to the house?
December 19, 2011 26 comments
It has been reported that the Deputy Prime Minister, Nick Clegg, has denounced David Cameron’s proposal to give tax breaks to married couples. Although I am a supporter of improved legal rights for cohabiting couples, I disagree with Nick Clegg’s opposition to the idea that, in his words, “the state should use the tax system to encourage a particular family form”. I believe that unmarried couples should be recognised in law, but also that those who choose to marry should get recognition and benefits recognising the important of their commitment.
However that shouldn’t keep the law from addressing the needs of all couples. The Government spat came in the same week that the Law Commission published a final report called Intestacy and Family Provision Claims on Death, in which it proposed to give certain qualifying couples in a cohabitating relationship rights to automatic inheritance on intestacy.
The report highlighted some startling figures: it is estimated between half and two-thirds of the adult population of this country do not have a will. It is thought that those most in need of a will – such as cohabitees – are more likely not to have one. The report also pointed to an ignorance of the law in relation to death, and particularly what happens to the estate of a deceased person who dies without a will (“intestate”) whether married or unmarried.
I know about the injustices that can occur all too well, because I often encounter couples who don’t know what will happen if one of them dies intestate, or with a will that makes insufficient provision for all of that person’s dependents. Such dependents can include include a former wife, a cohabitee and children.
A few years ago I acted for a very pleasant man who was getting divorced. He was in his late 30s and had two young children. His new partner was an equally pleasant woman, and I met her a couple of times during the divorce. The case settled, and he arranged to pay continuing maintenance to his former wife for the young children. He gave his wife his share of the marital home as a clean break.
I never expected to hear anything further. Sadly, about ten years later, his partner came to see me with bad news. My former client had been killed in a road accident. He had never made a will, and therefore died intestate. The couple had never married or had any children. Under the intestacy rules, his partner had no automatic entitlement to any of his estate. Instead the estate was automatically inherited, in its entirety, by his two children who were still under 18. As the children’s guardian, the man’s former wife was in charge of obtaining the probate (called “a grant of letters of administration” when there is no will). So his former wife was claiming his share of their home on behalf of the children.
My former client and his partner had bought their property together, as joint tenants. They believed that his half-share would automatically pass to her (as it did), but were unaware that a claim could be made against his share of the house on behalf of the children.
In previous posts I have explained the difference between people buying a property together as joint tenants and tenants in common. In this case they had agreed that each other’s share would automatically pass to the second partner on the death of the first, so they had bought the property as joint tenants and had both contributed what they could afford. At the time of purchase the couple had taken out a joint lives policy to cover the mortgage. This was now paid off following my former client’s death, and his share of the house was worth a significant amount of money. He had also left an estate of about £200,000 in savings, and a policy which had matured. All of it was inherited by the children and she got nothing – apart from a claim on half a house that she had understood would always be hers.
This lady had lived very happily with her partner as man and wife, and when she came to see me she was understandably in a bad way. She had earned far less than her late partner. On top of her bereavement, she was now facing the prospect of losing her home. She had found out, in the worst possible way, how cruel the law can be when there is no marriage and no will.
What if she had been married?
Under the intestacy provisions for married couples, this lady would have inherited the first £250,000 and had a life interest (the income) in half of amount remaining. Her partner’s children would have inherited the other half outright.
If there were no children, the wife of an intestate would inherit the sum of £450,000 outright, with a life interest in half the rest, and the remaining amount passing to surviving parents and siblings. This is not very satisfactory, but better than nothing at all.
So what were her options?
In this case, the Inheritance Provision for Family and Dependents Act 1975 applied. It was amended in 1995 on the recommendation of the Law Commission. A dependent cohabitee or, from January 1996, a cohabitee who is not a dependent but who lived with the deceased as man and wife for a period of two years immediately prior to the death, can make a claim for financial provision.
The court can make orders very similar to on divorce: maintenance, lump sums, transfer of property orders and so on. In this case, following a negotiation with the partner’s former wife on behalf of the children, an agreement was reached. A lump sum payment was to give the children all the child support they would have received had their father survived. The children were nearing their 18th birthdays, and we included some provision for university education within the calculation. The rest of the estate went to my client – including the house, which she kept. The estate paid all the legal costs.
The Law Commission’s next steps
Very few people are aware that their automatic entitlement is nothing at all if they are unmarried and their partner dies intestate. Even married partners are left in difficulty because of the archaic nature of intestacy law. This is an area that certainly appears to be in need of urgent reform.
The Law Commission’s report is accompanied by two draft bills. The Inheritance and Trustees Powers Bill (summarised here) proposes that if a spouse dies intestate, the entire estate will pass to the surviving spouse when there are no children or other descendants. When there are children, the Bill aims to simplify the sharing of assets. These suggestions make good sense and are years overdue.
More radically a second draft bill, The Inheritance (Cohabitants) Bill, would give unmarried partners who have lived together for five years the right to inherit on one another’s death. If the couple had a child together, this entitlement would accrue after two years’ cohabitation, provided the child was living with the couple when the deceased died. As the Law Commission has made clear, there is much here that is controversial, and support for the reform is by no means universal.
As the Law Commission also recognises, at present there is no law for regulating unmarried couples who have simply split up. As we now know, there will be no such provision in this Parliament. As always, however, the reasoning of the Law Commission is measured, restrained, cogent and above all, it is persuasive. It is practical and reflects an appreciation of the realities of modern life in the UK.
But what will the Government make of the latest proposals? Perhaps the fact that there are two draft bills, tells its own story. I think we will see change for married couples and intestacy. It is difficult to see any controversy there. When it comes to unmarried couples, however, I am far from certain about changes in the law relating to intestacy and automatic inheritance. Current disagreements within the Cabinet only serve to enhance my doubts.
In the meantime, whoever you are and whatever your circumstances, if you don’t have a will then please make one. There is no time like the present!
December 19, 2011
Categories: Cohabiting Couples