Law of succession: consultation

Chapter Three - Cohabitants and Intestacy

Statistics

3.1 According to the 2011 Census^[24] there were 1.5 million families living in households in Scotland. Of these, 65 per cent (967,000) were married couple families, 16 per cent (237,000) were cohabiting couple families and 19 per cent (291,000) were lone parent families. Further, of the 614,000 families with dependent children, 54 per cent (333,000) were married couple families, 15 per cent (91,000) were cohabiting couple families and 31 per cent (190,000) were lone parent families.

3.2 Of families with dependent children, step-families made up 8 per cent (26,000) of married couple families and 29 per cent (26,000) of cohabiting couple families and step families accounted for just over half (54 per cent) of the 15,000 cohabiting couple families where the youngest dependent child was aged 12 or over.

3.3 As with the statistics relating to reconstituted families, it is likely that now (2019) the numbers of cohabiting couples will have continued to increase. Given the increasing numbers of couples choosing to arrange their lives in this way, it is important that, if they do not leave a will, the law of intestacy delivers fair outcomes reflecting the way they have arranged their affairs in life.

3.4 There is however a fundamental question around whether or not cohabiting couples should be treated in the same way as married couples and civil partners for the purposes of intestate succession. It has been argued that cohabitation is a deliberate lifestyle choice and a rejection of marriage or civil partnership and the obligations and benefits which accrue with marital or civil partnership status. To devise a scheme which then imposes such obligations and benefits in the event of an intestate death could be regarded as inappropriate and even perverse.

3.5 A marriage or civil partnership is a valid means of regulating a relationship and acquiring mutual rights and obligations. Alternately making a will is another means of ensuring that an individual's property devolves on death as they intend, save for the existing limited protections in relation to legal rights.

3.6 Nevertheless, we know that many people do not make a will for a whole range of reasons and when someone in a cohabiting relationship does die without a will it cannot be necessarily assumed that they would not have wanted their cohabitee to inherit. Indeed there is often an economic imperative on death, particularly where dependent children are involved.

Other jurisdictions

3.7 The comparative research^[25] carried out by BIICL revealed that in Washington State, couples who live together are not considered as spouses for the purposes of inheritance law. Only married partners or registered partners^[26] are recognised.

3.8 The reason that cohabiting relationships are not recognised is on the basis that "…common law relationships are more likely to be casual and occasional and the couple is not presumed to support each other."^[27] Further there appears to be no appetite in Washington State to recognise cohabitation in a way that would result in the right to inherit. Other jurisdictions which do not recognise cohabitants for intestate succession purposes include Italy.

3.9 Conversely, in British Columbia, the definition of a spouse in intestate successions includes the situation where two persons have lived with each other in a marriage-like relationship for at least 2 years. Moreover, "… the Canadian courts have held that the fact that a couple did not live together and kept separate finances was not decisive" in terms of whether or not they were deemed to live in a marriage-like relationship.^[28]

3.10 In addition to British Columbia there are other examples of jurisdictions that treat a cohabitant equally to that of a surviving spouse. These include: The Australian states, Alberta, Manitoba, the Northwest Territories, Saskatchewan, New Zealand as well as much of Latin America. As with British Columbia there is generally a qualifying period.

Current Law

3.11 The current law does make provision for cohabitants in intestacy. But the rights are not automatic; rather they involve an application to the Court. Under section 29 of the Family Law (Scotland) Act 2006 (2006 Act) a cohabitant, within the meaning of section 25, has a right to make a claim on their deceased cohabitant's estate where there is no will within six months from the date of death. Cohabitants have no rights where the deceased left a will. The Commission highlighted that Section 29 of the 2006 Act has been the subject of much criticism; these criticisms were described in the 2015 consultation paper^[29] as follows:

• the court is given no guidance on the purpose of the award i.e. is it to provide for the cohabitant's future needs or is it in recognition of the nature and extent of contributions made by the cohabitant for the benefit of the deceased and their family during cohabitation? The only express guidance is that the award cannot be greater than the amount the applicant would have received if he/she had been the deceased's surviving spouse or civil partner.
• when exercising its discretion under section 29, the court is overwhelmed by the number of potentially relevant factors leading to difficulty in focusing on those which are significant in the particular case.
• due to a lack of case law there is very little judicial guidance on the most important factors to be taken into account.
• there is a potential conflict of interest between the applicant and the deceased's children who would otherwise inherit the estate. It is particularly acute where the only asset is the family home. A cohabitant's claim reduces the amount the deceased's children will inherit. Where the only asset is the family home, providing the cohabitant with a share of the estate, and placing the rest in trust for any children, may result in the sale of the home in which they all live.

3.12 Sixty-nine per cent of respondents agreed with the criticisms set out in the 2015 consultation paper. The remaining respondents either disagreed, or did not express a view on this. Seventy per cent also agreed that Section 29 of the 2006 Act should be repealed. Of the remainder, 23 per cent did not know. Of those who disagreed, some suggested that the section only lacked guidance on the purpose of the award whilst another pointed out that the section was still relatively new. The Commission recommended repealing section 29.

3.13 In place of section 29, the Commission recommended a two stage process to establish cohabitants' rights on death. The first stage would determine whether or not the couple were cohabitants and, if so, the second stage would determine the quality of the relationship which would be reflected in the percentage of the estate which the survivor should inherit. For the first stage, the court would consider:

a) whether they were members of the same household,

b) the stability of the relationship,

c) whether they had a sexual relationship,

d) whether they had children together or had accepted children as children of the family, and

e) whether they as a couple appeared to others to be married, in a civil partnership, or cohabitants of each other.

3.14 If the court determined that the person making the claim was a cohabitant, the second stage would be for the court to consider and fix the "appropriate percentage" that the cohabitant would be entitled to receive from the deceased cohabitant's estate based on the quality of the relationship. That percentage would reflect the extent to which the cohabitant should be treated in the same way as a spouse or civil partner of the deceased for this purpose. Once the percentage was determined that would be the proportion of a spouse/civil partner's rights that the cohabitant would receive. The Commission set out three factors to consider in this regard:

1. how long the couple have cohabitated;

2. the nature of their interdependence during that time; and

3. what contribution the surviving cohabitant made to their life together.

3.15 The court's discretion would be fixed solely on the nature and quality of the parties' relationship. The court would not be able to take account of, for example, the size of the estate or of the other beneficiaries. Once the appropriate percentage had been fixed, the cohabitant's entitlement could be calculated. That entitlement could never be more than the amount a surviving spouse or civil partner would have received.

3.16 We asked for views on the factors and the responses were mixed. There was concern that the scheme was too complex. An appropriate test or definition is a matter on which we will reflect further.

3.17 Rather than the two step process proposed by the Commission it may be possible for the court to determine the existence of a cohabiting relationship perhaps through a more focussed or distilled version of that recommended by the Commission:

a) they as a couple appeared to others to be married, in a civil partnership, or cohabitants of each other; and

b) they had a financially interdependent relationship to which they both contributed.

3.18 Thereafter, if the test is met, one option is to simply provide that in these circumstances a cohabitant's rights would be equivalent to those of a spouse or civil partner. There need be no court involvement in this aspect of the process. We are therefore seeking views on what a surviving cohabitant should receive from the other's estate.

3.19 In England and Wales, cohabitants also have well established rights in intestacy to apply to the court for financial provision. In its Report Intestacy and Family Provision Claims on Death^[30] , the Law Commission for England and Wales considered whether the time was right for cohabitants to have an automatic entitlement in intestacy.

3.20 In making its recommendations the Law Commission was of the view that the issue was likely to be highly contentious and therefore produced a separate piece of draft legislation to give these particular recommendations effect. To date, the provisions relating to cohabitants have not been progressed by the Government in England and Wales.

3.21 Whilst there was no overwhelming support for giving cohabitants automatic rights in intestacy, the Law Commission were nonetheless motivated by a concern to address the problem "… caused to a large extent by ignorance of the law - the widespread but mistaken belief that cohabitants acquire the status of "common law spouses" after a certain period of time. Real hardship is caused to those who only discover on the death of a partner that this is not the case."^[31]

3.22 The Law Commission adopted a simple definition of cohabitation which was that immediately before the death of the deceased, they were living in the same household as the deceased; and as the deceased's spouse. They did not consider that the definition required any further elaboration.

3.23 The Law Commission then opted for a 'duration' qualifier on the basis that it is a useful means of indicating a serious and committed relationship. In addition, they considered that the longer the relationship the more likely there was to be some financial interdependencies.

3.24 The Law Commission recommended that where a person had lived for the whole of the five year period immediately prior to the death of the deceased in the same household and as their cohabitant, they would be a qualifying cohabitant for the purposes of inheriting in intestacy. Where the deceased and the surviving cohabitant had a child together the period was reduced to two years.

3.25 In terms of what those inheritance rights should be, the Law Commission recommended that they should be the same as for a spouse.

Washington Model

3.26 We would be interested in views on whether, if a similar approach on intestate death to that of the operation of the matrimonial property regime in divorce were to be adopted for spouses and civil partners, it would be possible to extend the regime to cohabitants on intestacy.

Surviving spouse and cohabitant

3.27 Consideration would also need to be given to situations where the deceased is survived by both a cohabitant and a surviving spouse/civil partner.

3.28 Different jurisdictions deal with this situation differently. For example, the law in British Columbia provides that they would share the spousal share as they agree and if they cannot agree then it is for the courts to determine the appropriate share for each. A similar approach is taken in New South Wales and in New Zealand provision is made for equal sharing^[32].

3.29 For England and Wales, the Law Commission recommended that a person would only become a qualifying cohabitant in relation to a person who died intestate where the deceased was not married or in a civil partnership immediately before his or her death. Similarly, in Norway recognition of a cohabitating relationship is precluded where one of the partners is married or a civil partner or in another established and recognised cohabiting relationship.^[33]

3.30 In Scotland, under the current law, the rights of a spouse or civil partner are given priority over a cohabitant. The prior and legal rights of a spouse or civil partner are firstly deducted from the deceased's intestate estate and any award to the cohabitant under section 29 can only be made out of the balance.

3.31 When the Commission considered their new scheme for cohabitants they recognised that their proposal, that where a deceased died and was survived only by a spouse or civil partner (and no issue) the surviving spouse or civil partner should inherit the entire estate, would leave no estate upon which a surviving cohabitant would have a claim. Both they and a large number of their consultees agreed that this outcome was "too harsh".^[34]

3.32 The solution offered by the Commission was predicated on their proposals set out at paragraphs 3.13 to 3.15 above. They proposed that the spouse/civil partner's share should be divided between the spouse or civil partner and the cohabitee. The division was to be based on the appropriate percentage (see paragraph 3.15) being applied to half of the spouse/civil partner's share. They illustrated their proposal with some examples, one of which is set out below:

A dies intestate. He is survived by his civil partner, B and his cohabitant, C. there are no children. The estate is worth £500,000. But for A's relationship with C, B would be entitled to the whole estate. The relevant amount is therefore £500,000. The surviving cohabitant, C, is entitled to the appropriate percentage of half the relevant amount i.e. £250,000. The appropriate percentage is 25% and C is therefore entitled to £62,500. B is entitled to the balance of the relevant amount i.e. £437,500.

3.33 Under these proposals a cohabitant could never inherit more than a spouse or civil partner but where the appropriate percentage was deemed to be 100% they would inherit the same amount.

3.34 If the law is reformed in such a way as to negate the need for a cohabitant to apply to the court for a share of the intestate estate of their partner there would be no court declared appropriate percentage. In these circumstances the concept of equal sharing, or sharing as agreed may be viable alternates.

3.35 Should the current system of application to the court be retained, in a modified form or otherwise, it is clear from responses to the 2015 consultation that the period for making an application should be extended to one year from the deceased's death and in these circumstances, the Scottish Government will legislate to extend the period from six months to 1 year.

Questions

9. Do you agree that cohabitants should continue to have to apply to the courts in order to obtain any financial provision in intestacy?

Yes/No
Reasons

10. Do you agree that cohabitants should have an automatic entitlement to inherit in intestacy?

Yes/No
Reasons

11. Do you agree that a qualifying cohabitant should have the same rights as a spouse or civil partner in intestacy?

Yes/No
Reasons

12. Should a cohabitant inherit where there is a surviving spouse or civil partner?

Yes/No
Reasons

13. Should a surviving spouse or civil partner inherit where there is a surviving cohabitant?

Yes/No
Reasons

14. Do you agree that where there is both a surviving spouse and a surviving qualifying cohabitant that the spousal share should be split equally between them?

Yes/No
Reasons

15. Do you agree that where there is both a surviving spouse and a surviving qualifying cohabitant that the spousal share should be split between them as agreed and where the parties cannot agree that the Courts should determine the split?

Yes/No
Reasons