Ricky Gervais, inheritance tax and the cohabitation conundrum

When comedian Ricky Gervais recently revealed that he may marry his partner Jane Fallon after more than 40 years together, it was not a romantic proposal that grabbed the headlines. Instead, it was his reason for doing so.

Gervais explained that inheritance tax may be what ultimately persuades the couple to marry. After decades of living together, sharing a home, combining finances and building a life together, he questioned why the law should treat them differently from a married couple. As he put it: "How more married can you be?"

His comments have reignited a debate that family lawyers have been having for years. Should long-term cohabiting couples have greater legal protection? And should anyone feel compelled to marry simply to avoid a tax bill or to secure legal rights for their partner?

The timing is particularly interesting given the government's recent consultation on reforming the law affecting cohabiting couples.

Why inheritance tax matters

For inheritance tax purposes, married couples and civil partners are treated very differently from cohabiting couples.

Broadly speaking, assets can usually pass between spouses and civil partners without an immediate inheritance tax charge. Unmarried couples do not benefit from the same exemption, regardless of how long they have been together.

In the case of wealthy couples such as Gervais and Fallon, that distinction could have significant financial consequences. But the wider issue extends far beyond inheritance tax. The reality is that many cohabiting couples assume the law recognises their relationship in much the same way as marriage, particularly where they have lived together for many years. Unfortunately, that assumption is often misplaced.

The myth of the "common law spouse"

One of the most persistent myths in family law is the idea of a "common law marriage". Despite what many people believe, there is no legal status of common law husband or wife in England and Wales. Living together for a number of years does not automatically give a couple the same rights as spouses or civil partners. That can come as a shock when relationships break down.

Unlike divorcing spouses, cohabiting couples generally have no automatic right to claim financial support from one another. There is no automatic sharing of assets and disputes about property ownership are often determined through complex principles of trust and property law.

Where children are involved, some financial claims may be available under Schedule 1 of the Children Act 1989, but these are focused on meeting the needs of the child rather than creating a broader financial settlement between the adults.

The position on death can be equally problematic. If a cohabiting partner dies without a will, the surviving partner may find they have no automatic entitlement under the intestacy rules.

What is the government proposing?

The government's consultation, A Fairer End to Relationships, proposes some of the most significant changes to cohabitation law in decades. The proposals are not law, but if they become law they would introduce a new framework allowing certain cohabiting couples to make financial claims when a relationship ends.

The current proposals suggest that the framework could apply where:

• a couple have lived together in an enduring family relationship for at least three years; or

• they have a child together, regardless of the length of the relationship.

Potential financial claims could include:

• lump sum payments;

• property adjustment orders;

• pension sharing orders; and

• limited maintenance in certain circumstances.

The consultation also considers whether cohabitants should receive stronger rights when a partner dies without making a will.

Importantly, the proposals are not intended to replicate divorce law. The government has made clear that any rights available to cohabitants would be more limited than those available to married couples and civil partners.

Why are the proposals proving controversial?

As with most major family law reforms, opinion is divided.

Many organisations have welcomed the consultation as a long-overdue attempt to bring the law into line with modern family life. Resolution, CILEX and others have argued that the current framework leaves too many families vulnerable and fails to address the widespread misunderstanding surrounding cohabitation rights. They point to the growing number of couples choosing to live together and the financial hardship that can arise when these relationships break down or a partner dies.

STEP, the professional body for trust and estate practitioners, has also broadly welcomed reform. However, it has warned that any new regime must be clear, objective and tightly defined. In its view, uncertainty about who qualifies for protection could create disputes rather than reduce them.

Others have expressed more fundamental concerns.

Baroness Deech has been one of the most prominent critics of the proposals. She argues that many people deliberately choose not to marry and should not automatically acquire marriage-like obligations because they have lived together for a certain period. She has questioned whether the proposals adequately respect personal choice and consent, particularly for divorced or widowed individuals who value their financial independence.

There are also practical concerns.

His Honour Judge Edward Hess, Deputy National Lead Judge of the Financial Remedies Court, has suggested that the reforms could generate a substantial increase in court applications and place additional pressure on an already stretched court system. He has called for careful consideration of the likely resource implications before any reforms are implemented.

Supporters of reform disagree with those projections, arguing that many disputes settle without court intervention and that clearer legal frameworks may reduce conflict in the longer term.

What both sides appear to agree on, however, is that public understanding of the current law remains poor. Millions of people continue to make life decisions based on assumptions about legal rights that do not actually exist.

What should cohabiting couples do now?

The most important point is that the law has not yet changed. Until any reforms are introduced, cohabiting couples remain subject to the current legal framework.

That means it is sensible to consider:

• Making a will. If you want your partner to inherit from your estate, do not assume the law will achieve that automatically.

• Reviewing how property is owned. The way in which property is owned can have significant consequences if a relationship ends or one partner dies.

• Considering a cohabitation agreement. A cohabitation agreement can help couples record their intentions and provide clarity about financial arrangements.

• Checking wider financial planning. Pensions, life insurance policies and death-in-service benefits do not always pass in the way people expect, particularly for unmarried couples.

The bottom line

Ricky Gervais' comments may have focused on inheritance tax, but they highlight a much broader issue. Should couples have to marry in order to protect one another financially?

For some, the answer is yes. Marriage and civil partnership are legal statuses carrying rights and responsibilities, and couples who want those protections can choose them. For others, the law has failed to keep pace with modern family life. Millions of couples now live together outside marriage, often for decades, and many mistakenly believe they already have legal protection when they do not. The government's consultation seeks to bridge that gap. Whether it has found the right solution remains the subject of considerable debate.

What is beyond dispute, however, is that no couple should discover their legal position for the first time during a separation or after a bereavement. Understanding your rights now could avoid expensive and difficult surprises later.

Don't assume the law will protect you. Whether you are buying a home, raising children or planning for the future, understanding your legal position now could save considerable stress, uncertainty and cost later. A simple review of your wills, property ownership and financial arrangements can provide valuable peace of mind. Please get in touch if you'd like to speak to one of our family law specialists.

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