What do LGBTQ+ families and individuals need to be aware of?
The law continues to evolve to reflect modern family structures, including LGBTQ+ families. However, many legal outcomes still depend on whether a relationship is recognised through marriage or civil partnership. It is important to understand how this affects your inheritance rights and exposure to inheritance tax (IHT).
Married couples and civil partners
All married couples and civil partners have the same inheritance rights, including:
- rights under the intestacy rules if a partner dies without a Will; and
- the spouse or civil partner exemption for IHT, allowing assets to pass to the survivor free of tax.
These protections do not apply to unmarried couples. Cohabiting couples face the same legal position regardless of their family structure.
Entitlement to inheritance
A cohabiting partner has no automatic right to inherit under the intestacy rules. Assets held in one partner’s sole name will not pass to the survivor. A properly drafted Will is therefore essential. Without one, the survivor may need to make a claim against the estate, which can be costly and uncertain. Marriage or civil partnership will usually revoke an existing Will, unless it was made in contemplation of that event.
Inheritance tax
There are no special IHT exemptions for cohabiting couples. Each individual has a tax-free nil-rate band of £325,000 and amounts above this are usually taxed at 40%, unless reliefs apply. Lifetime gifts may also affect the amount available on death.
Unlike spouses and civil partners, cohabiting partners cannot transfer unused allowances between them to potentially double the nil-rate band on second death. To prevent a potential second 40% charge on the same assets on second death, instead of a direct gift on first death, a gift to a discretionary trust could be included to ‘use’ the allowance. This allows the surviving partner to benefit, while keeping the assets outside their estate for IHT purposes.
Consideration also needs to be given to the additional £175,000 residence nil-rate band allowance which applies (broadly) on gifts to descendants but is tapered and eventually lost for estates over £2million. Again, any unused portion is transferable between spouses and civil partners but would be lost if not used on first death of a cohabiting couple.
Example:
Claire has assets of £600,000 and leaves them to her partner Kate. They have a son, Harry. After deducting the £325,000 allowance, £275,000 is taxed at 40%, resulting in an IHT liability of £110,000. If those assets remain in Kate’s estate, they will be added to her other assets and may be taxed again on her death. Claire could instead consider leaving her assets to a discretionary trust under which both Kate and Harry could benefit.
This will not usually reduce the IHT on the first death in straightforward cases, but the assets in the trust will not be taxed on Kate’s death so avoiding a double payment of IHT and increasing the amount Harry ultimately receives. There is a potential charge to IHT on every ten-year anniversary of the trust’s creation and when capital leaves the trust, with a maximum effective rate of up to 6% on value above the nil-rate band (often lower in practice). The suitability of this approach will depend on the assets and overall estate.
Property and non‑estate assets
How assets are held is important. Property held as joint tenants passes automatically to the surviving owner. Property held as tenants in common passes under a Will.
Pensions and life policies often pass outside the estate. However, from April 2027, it is proposed that unused pension pots will be taken into account for IHT purposes. It is important to complete nomination or expression of wishes forms, particularly where couples are not married.
Children, guardians and parental responsibility
Guardians for children under 18 can be appointed in a Will. Only individuals with parental responsibility (PR) can make this appointment.
- The birth mother always has PR.
- In many cases, both parents will have PR automatically, particularly where they are married or in a civil partnership at the time of birth and the child is born through a licensed UK clinic.
- In other cases, PR may be acquired by agreement, court order or adoption.
Where a partner does not have PR, careful planning is required. A Will can appoint a guardian, and this appointment can confer PR when it takes effect.
Similar considerations apply to step‑parents and there is no automatic parental responsibility for stepchildren.
Domicile
Domicile affects tax and succession and is a complex area. While historically linked to a father’s domicile, the position can be less straightforward in modern family structures, including same‑sex parenting and surrogacy arrangements. Specialist advice should be taken where domicile may be relevant.
Gender recognition and Wills
Individuals can legally change their gender under the Gender Recognition Act 2004 and obtain a gender recognition certificate (GRC) which changes their gender for legal purposes. This can affect gifts in Wills defined by class (for example, “sons” or “nieces”). Wills made before 4 April 2005 containing a gender-specific gift are generally not affected by a GRC. For example, in a gift to ‘my nieces’ a beneficiary who later obtains a GRC recognising a male gender would still be entitled. Wills made after 4 April 2005 are generally interpreted using the individual’s acquired gender and so this kind of class gift may affect the entitlement of someone with a GRC (and in the previous example they would no longer be entitled as they are now treated as male for succession purposes).
To avoid uncertainty, and the need for a deed of variation or court application to rectify any failed gift, Wills should identify beneficiaries clearly or include appropriate definitions.
Summary
Many of the key risks arise where relationships are not formalised through marriage or civil partnership. To ensure your wishes are carried out and to manage tax exposure, you should consider:
- making a clear and up‑to‑date Will;
- reviewing ownership of property and other assets;
- considering trust planning where appropriate; and
- completing nomination forms for pensions and life policies.
Taking professional advice will help ensure your arrangements remain effective.
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