Couples face 40% inheritance tax hit due to ‘common myth’

A new study has shown 51 percent of Britons asked have the false notion of ‘common law marriage’, according to Stowe Family Law. This is namely that couples who live together after a certain number of years have the same legal rights as a married couple.But unfortunately this is not true, and with more couples cohabiting than ever before, it could create issues later down the line. The Government has recently rejected calls for reform to cohabitation laws, as per a report by the Women and Equalities Committee.The committee had called for better protection for cohabiting couples and their children from financial hardship in the event of a separation.However, the Government also addressed another issue where cohabiting couples could come unstuck: inheritance tax.READ MORE: Rishi Sunak faces ‘huge risk’ on state pension triple lock Inheritance tax warning as couples face shock IHT bill due to ‘common myth’ (Image: Getty)Mr Sunak’s Government states it has no plans to extend the inheritance tax treatment  of spouses and civil partners to cohabiting couples.It will keep the matter under review in future, it added.This is likely to be bad news for the couples who have no intention to marry, as they will not be able to benefit from certain tax exemptions.There is normally no IHT to pay if a person leaves everything above their threshold to their wife, husband or civil partner.DON’T MISSMillions of Britons could be eligible for savings boost worth £1,200 [INSIGHT]Pensioners with arthritis could get up to £369 per month [UPDATE]Pensioners ‘cut back on medicine and food’ as costs soar [LATEST] Inheritance tax: Many people will be hoping to avoid the tax legally (Image: Getty)Above all else, cohabiting couples are strongly encouraged to secure a Last Will and Testament.This document clearly lays out a person’s wishes for when they die, and can be helpful in dealing with the estate.Ms Chisnall added this can be vital due to the fact cohabiting couples do not have the same rights in life or death as married couples.She added: ‘Without a Will, a cohabitee can claim under the Inheritance (provision for family and dependants) Act 1975, if they have been in a relationship for at least the two years up to the point of their partner’s death, and that they were living in the same household as if they were a married couple.’It is worth noting these claims are complicated and expensive to progress, and as a result, any outcome is difficult to predict. The expert concluded: ‘While the law needs to change in line with the increasing trend of cohabitation, the Government’s response to the report re-enforces the fact that this is unlikely to happen soon. ‘Therefore, people need to take steps to protect themselves financially, and a cohabitation agreement and Will are two ways to do so.’