This month legal expert, Matt Parr tells us everything we need to know about wills and inheritance – especially if you’re lesbian, gay, bisexual or transgender.
Wills and inheritance issues in the gay community
Members of the gay community face many of the same dilemmas as opposite-sex couples when it comes to estate planning, wills and their potential exposure to inheritance tax.
According to figures recently issued by the Office of National Statistics, there were 190,000 same-sex families in the UK in 2017 and the majority of those were co-habiting couples as opposed to being married or in a civil partnership. In this situation, those couples or family units face the same issues as co-habitants of the opposite sex. Therefore, there are some important points that they should be aware of.
‘Common law’ civil partners?
Co-habiting partners do no automatically inherit assets which were held in their partner’s sole name. In the same way that there is no such thing as “common law husband/wife” there is no such thing as a “common law civil partner”. With this in mind, if you aren’t married or in a civil partnership it is extremely important that wills are prepared to ensure that the surviving partner is adequately provided for after your death.
This can prevent family feuds, confusion over your wishes and costly legal action.
If you’re not married or in a civil partnership and you have no children of your own, then the law dictates that your parents will inherit your estate. Unfortunately, rifts are not uncommon amongst families of the gay community and there are many instances of parents being unwilling to accept their son’s same-sex partner into the family.
The thought of a parent inheriting a share in a property you own as tenants in common with your partner may fill you with dread – is there any possibility your parents would wish to co-own a property with your partner? If the answer is no, your parents could insist on selling the property, forcing your partner to move. Preparing wills would prevent this situation from arising. When property is owned as joint tenants as opposed to tenants in common your partner will inherit your interest in the property regardless of whether you have a will or not.
There is no form of inheritance tax relief for co-habiting couples of any sexuality. Consequently, only the first £325,000 of your estate, otherwise known as your Nil Rate Band (NRB) will be tax free – the balance over and above this will be taxed at a rate of 40 per cent. Therefore, even if you did decide to leave your entire estate to your co-habiting partner, they could be left with a hefty inheritance tax liability. Married couples and those in civil partnerships can leave their estates to each other and benefit from a total exemption for inheritance tax purposes, meaning on first death at least, there will be no inheritance tax to pay.
Unlike married couples and those in civil partnerships, cohabiting partners are unable to transfer their unused NRBs between them. Consequently, many gay couples make use of trusts in their wills to try and avoid an inheritance tax liability by giving them access to the funds without necessarily increasing their own inheritance tax exposure. The use of trusts to control the way funds are inherited, by whom and when, is particularly helpful when one or both of you have children from a previous relationship to whom you would wish to leave your estate, without compromising your surviving partner’s rights to live in your joint property after you have died. Advice should be sought as to your options in this scenario in order to ensure the trust is drafted correctly and in accordance with your wishes.
Gay couples who have taken the plunge and married or entered into a civil partnership can benefit from the same legal rights as opposite-sex couples, including the right to receive a statutory legacy together with a certain proportion of the balance of their partner’s estate if their partner dies without making a will (intestate). Ideally, however, the intestacy rules should not be relied on and my advice would always be to prepare a will specifying how you wish for your estate to be distributed.
A very recent Supreme Court ruling has paved the way for opposite-sex couples to enter into civil partnerships which will ensure absolute equality in the eyes of the law between “straight couples” and gay couples. Previously only same-sex couples could enter into civil partnerships.
Members of the gay community enter into polyamorous relationships in the same way as those in the heterosexual community. Whilst still not necessarily subject to a wider understanding by the public, it is impossible to deny that these forms of relationships exist and therefore it is right to encourage those who enter into them to seek advice on their rights and obligations to one another.
According to UK law, it is illegal to enter into more than one marriage or civil partnership. How members of a polyamorous relationship choose to protect each other’s interests is, therefore, more difficult – but not insurmountable. Again, the use of trusts in wills can prove extremely helpful in ensuring a degree of flexibility and afford a level of protection for the assets within the trusts. This is often required when three or more people wish to co-habit or enter into a relationship with each other.
Seeking advice about your options in this regard can be tricky. The fear of judgment and lack of understanding can deter you from gaining an insight into your options, but there are advisers equipped with the knowledge to help and offer a non-judgmental ear in complete confidence.
Currently, under UK law it is not possible to self-define your gender without a formal diagnosis of Gender Dysphoria and a successful application to a gender recognition panel for a Gender Recognition Certificate (GRC). This process can be lengthy and painfully intrusive. But once you have a GRC, what are the legal implications for estate planning and inheritance purposes?
It is important to consider the fact that wills prepared post-4 April 2005 which claim to gift assets to, for instance, “my sons” or “my nephews”, will exclude an individual who has obtained a GRC and who now identify as female. The beneficiary would need to apply to court to alter the disposition in order to rectify a failed gift because of a change in their gender means they no longer align the gender stated in the will. This application could become expensive and lengthy if other beneficiaries take objection to the change being made if this will adversely impact their own share of the estate.
Any will prepared before 4 April 2005 which purports to gift assets in this way does, however, continue to be effective despite a GRC having been issued to the beneficiary.
Members of the transgender community should be aware of the fact that family members may need to amend their own wills to take into account this change in the law and to avoid any uncertainty around the wording of such a gift.
With the growing number of gay couples living together, marrying, entering into civil partnerships and starting, fostering and adopting families of all different sorts, the gay community is just beginning to grapple with the same issues that heterosexuals have faced for centuries. Yet, some of these issues are easily overcome with the right advice.
Ultimately, the worst thing you can do is bury your head in the sand when it comes to discussing what can be tricky and sensitive matters with your family and planning ahead, where possible, is always the best course of action.
Matt works with individuals and their families to help them negotiate the many pitfalls they can encounter when planning for their future by providing pragmatic, bespoke advice. Being a member of the LGBTQ community himself, Matt is particularly keen to ensure that he offers an open door for those within the community wishing to obtain advice without fear of judgment or discrimination.
Matt advises his clients on tax-efficient estate planning options which could include the preparation of wills, trusts, deeds of gift and deeds of variation. As well as administering estates and preparing lasting powers of attorney. Furthermore, Matt also works with organisations wishing to become charities or alter their organisation’s structure.
– Fully qualified member of the Society of Trust and Estate Practitioners
– Currently undertaking a diploma to obtain the Advanced Certificate in will preparation
– Accredited member of Solicitors for the Elderly
– Dementia Friend
and works for Shakespeare Martineau