Dispelling the myths surrounding cohabitation, marriage and your legal rights
Sometimes I have an uphill struggle convincing people that I know what I’m talking about. Years of belief that the world works in one particular way leads to much scepticism when a different version is presented. This is despite the fact that they’ve approached me in the first place for a definitive legal answer. Still, it’s always good when I can dispel a few myths and help steer an earnest enquirer in the right direction.
No Ring, No Rights
Take for example the frequently used expression ‘common law husband or wife’. Common law marriages have not existed in England since 1753 yet according to a survey in 2004, 61% of the population mistakenly believe that living together gives you the same rights as if they were married.
They are wrong. Cohabitees miss out on a whole range of rights such as:
- no right to claim maintenance upon separation
- no automatic right of inheritance if their partner dies
- no automatic entitlement to "Bereavement damages" if their partner dies in an accident and there is a claim for damages
- no widow’s or widower’s benefit
- no tax concessions (for example, no exemption from paying inheritance tax)
- no usual right to their partner’s pension in the event of death
- no claim to any property owned by their partner (unless he or she is able to prove ownership of a share in the property)
The number of cohabiting couples has increased by 65% in the last decade and the predictions are that by 2014, married couples will account for less than half of British families.
So what is the solution to this lack of legal protection? Well, marriage obviously or for the more circumspect amongst us; placing property and assets in joint names, nominating a beneficiary under your pension scheme, making a Will and considering a cohabitation agreement. Rights in property can also be regulated by drawing up a Declaration of Trust. James and Tina came to see me recently as they had decided to buy a house together. Both were selling their current homes but for significantly different amounts of profit. James planned to use £90,000 toward the deposit on the new place while Tina had only £20,000 to put down.
They both wanted to protect their investments and agreed to pay equally towards their mortgage. I drafted a Declaration for them to ensure if they ever sold or separated they would get back a return on their initial investments and divide any remaining equity equally. The Declaration not only set out how they owned the house but what would happen if one of them was temporarily out of work, decided to leave, failed to pay their share of the mortgage or if Tina became pregnant.
The Declaration gave them both a comprehensive plan for all eventualities and so provided them with peace of mind and much less chance of any dispute arising in the future.
To Have and To Hold On To
Other misconceptions surround rights of married couples or those in civil partnerships. I’m often asked by divorcing clients whether they will have to give their spouse half of everything. More pessimistic clients worry that they’ll be left homeless and penniless.
None of these scenarios are true. There is neither an automatic 50:50 split on divorce nor any preset bias towards one party or the other. The overriding rule is that any division should be ‘fair and reasonable’. The law provides a list of factors to be taken into account when working this out and this includes such details as the length of marriage, the age of any children and both parties’ needs and resources.
Another common assumption is that there is a financial penalty against the party at fault for the marriage breakdown. Adultery or other types of morally frowned upon behaviour do not carry an automatic fine. Only in exceptional circumstances does one person’s behaviour have an effect on the financial outcome of divorce and usually that behaviour is financial in nature such as intentionally giving up work or spending significant amounts of family savings.
Where there’s a Will
70% of the population do not have a Will and 1300 people die intestate every day in Britain. Just as cohabitees sometimes think they will receive all their partner’s wealth and fortune when they die, so too do married couples and civil partners.
Well again, this simply isn’t right. A lot of assets pass outside of any Will or Intestacy rules. For example jointly owned property or bank accounts pass to the survivor and Pension funds are often nominated direct to a beneficiary.
For assets owned in your sole name it is better to make a Will to regulate what happens on your death. Without a Will the rules of Intestacy apply and these do not always have the expected or fair outcome.
If you are married with children then your spouse inherits the first £125,000 of your estate. Your children receive half the rest and your spouse then has a life interest (right to receive the income) in the remaining estate which eventually passes to your children on your spouse’s death. This situation cropped up when Maureen’s husband died. He had no Will and the family home bought in the 1970s was in his sole name and was now worth £530,000. Their bank accounts and savings were in their joint names and Maureen automatically received these. Maureen has two children and all of them were unaware there was going to be a problem with the house. They naturally thought that Maureen would inherit it.
But Maureen’s name could not easily be put on the house. Once they understood the Intestacy rules, they all agreed they wanted to change these so that Maureen could stay put with the added security of owning her home. So we prepared a Deed of Variation - giving the property to Maureen and her children were happy to wait a while longer for their inheritance.
If everyone involved gets on well then an agreement can quickly be reached but even so this put Maureen and her family through some legal hoops that they could have done without.
If you are married without children the position can get even trickier. Your spouse inherits the first £200,000 (an improvement on the first formula) and a life interest in half the remaining estate with the next nearest relatives getting half the remainder now and the rest on the spouse’s death. Those relatives may not be so amenable to changing the Intestacy rules and prolonged legal disputes can arise.
For unmarried couples their children will inherit unless a Will says otherwise. If you have no children then the Intestacy rules provide a list of which relatives have next priority:
- Your parents
- Brother and sisters or their issue
- Uncles and aunts or their issue
And of course if you have no relatives then the Government gets the lot.
These rules can produce interesting results and often involve a lot of time and research tracking down missing beneficiaries. Harry was 81 when he died last year. His neighbour used to visit him but he had no close relatives. The neighbour was able to give me the name and possible address of a niece and on contact it transpired that Harry was one of 7 brothers and sisters. So the search was on. The niece did most of the work as there simply wasn’t enough money in the estate to merit expensive tracing agents or legal fees.
All 14 beneficiaries were found and each will receive just short of £2000. The moral of the tale of course is that it would have been so much simpler, quicker and cheaper if Harry had made a Will and his modest estate could have gone to people he knew and cared about.
Things are not always as we think they should be. With this in mind I try to provide enquirers with more clarity and less confusion and hopefully dispel a few legal myths along the way.