In 2018, Prime Minister Theresa May announced that heterosexual couples will be able to enter into civil partnerships, giving them substantial tax benefits. It could open the way for cohabiting siblings to also receive the same treatment, pending a proposed change in the law.
Ms May’s announcement follows a Supreme Court ruling in June this year to allow Rebecca Steinfeld and Charles Keidan to have a civil partnership instead of a marriage. Before this, only same sex couples were allowed such partnerships.
A couple in a civil partnership is entitled to the same beneficial treatment in terms of tax, pensions and inheritance as married couples. The ruling therefore aims to provide greater security for unmarried couples who have formalised their relationships, and for their families.
But some siblings who have been cohabiting for years believe they should have the same rights too.
Sister Act inclusion
Two recent cases have highlighted the issue. Both involve sisters who had lived together for over 30 and 43 years respectively.
In both cases, each sister wanted to leave her estate, including her share of the jointly-owned home, to the other. Both homes, over time, had risen substantially in value. However, on the death of the first sister, her estate will only benefit from the £325,000 tax free allowance and not any of the extra benefits that married couples and civil partnerships now receive including the extra inheritance tax allowance introduced in April 2017 in relation to the family home. This currently allows an extra £125,000 to be passed tax-free to children and grandchildren. Siblings are also excluded from the right to pass assets to each other free of inheritance tax.
This means that, in the case of these sisters, there would be substantial extra inheritance tax to pay. In one case, the surviving sister would be forced to sell their home of 23 years.
Both sets of sisters want the law changed to give legal recognition to ‘sibling’ couples who have decided to spend their lives together, in jointly owned homes until parted by death. The Civil Partnership Act bans ‘prohibited degrees of kindred and affinity’, which includes siblings. Lord Lexden has proposed a bill to include siblings in the Act. The bill received its second reading in the House of Lords in July but has yet to reach committee stage.
So a change could be coming soon. But in the meantime, the death of a co-habiting sibling could leave the survivor with the only options of selling up, borrowing money, or using an equity release scheme.
For more information please contact our Wills, trusts and probate team.