Second Families, Unmarried Couples and the Family Home: Who Gets the House?

For most couples the home is the most valuable thing they own, and the way it is owned often decides who inherits it more than the will does. Get it wrong in a second marriage and the children of your first relationship can lose their inheritance entirely. Get it wrong as an unmarried couple and your partner can be left sharing the house with your relatives, facing an inheritance tax bill that a married couple would not pay.

This article explains how the rules work in England and Wales, where they catch families out, and the steps that put things right.

Start with how you own the house

Where two or more people own a home, they hold it in one of two ways.

Joint tenants own the whole property together, without separate shares. When one dies, the survivor automatically owns all of it under the “right of survivorship”. The house does not form part of the deceased’s estate under their will, so a will that leaves “my half of the house” to someone else has no effect on it while the joint tenancy remains.

Tenants in common each own a distinct share, which can be equal or unequal. When one dies, their share passes under their will, or under the intestacy rules if there is no valid will.

Many people do not know which applies to them. The register at HM Land Registry will usually tell you: a “Form A” restriction on the title generally means the owners are tenants in common. If there is a separate declaration of trust, it will set out the shares.

Changing a joint tenancy

A joint tenant can “sever” the joint tenancy at any time by serving written notice on the other owner. The other owner’s agreement is not needed. Severance turns the ownership into a tenancy in common in equal shares, and a Form A restriction should then be registered.

Severance must go hand in hand with a will. Once you are a tenant in common, your share passes under your will, so if your will is out of date, or you have none, severing could send your share somewhere you did not intend.

The second-marriage problem

Take David and Sue. Both have children from earlier marriages. They marry, buy a house together as joint tenants, and make wills leaving everything to each other and then, on the second death, equally between all four children.

David dies first. The house passes to Sue automatically, and everything else passes to her under David’s will. From that moment it is all Sue’s. She is free to make a new will leaving everything to her own two children, and nothing obliges her to keep the old arrangement. If she remarries, her existing will is revoked by the marriage. If she then dies without a new will, her new husband may take most or all of the estate under the intestacy rules.

Any of these outcomes can leave David’s children with nothing from the house, even though no one set out to cut them out. Stepchildren have no rights under the intestacy rules unless they were adopted, and a claim by an adult child under the Inheritance (Provision for Family and Dependants) Act 1975 is uncertain and expensive.

It is possible to make “mutual wills”, where a couple agree that neither will change their will after the first death. They are rare in practice: the agreement must be proved, they are inflexible, and they often lead to disputes. For most blended families, a life interest trust is the better answer.

The usual solution: a life interest trust in your will

With a life interest trust, the house is owned as tenants in common, and each of you leaves your share in your will to trustees, not outright to the other.

The surviving spouse is the “life tenant”: they can live in the property or receive the income from it, but they do not own the capital. The people who inherit when the trust ends are the “remaindermen”. Each spouse’s children are protected, and the survivor keeps a secure home.

A well-drafted trust deals with the practical questions in advance:

• Moving home. The trustees can usually sell and buy a smaller or more suitable property, with the trust continuing in the new one.
• Running costs. The will should say who pays for repairs, insurance and outgoings. Normally it is the person living there.
• When the right ends. You can decide whether it continues if the survivor moves into care, remarries or lives with a new partner.
• Trustees. Choosing the survivor alone as trustee weakens the protection. A child from each side, or a professional trustee alongside the survivor, is more balanced.

The tax position

Where a spouse or civil partner is given a life interest by will, the law treats them for inheritance tax as if they owned the trust property. That has two consequences:

• No inheritance tax on the first death. The spouse exemption applies to the share that goes into trust, as it would to an outright gift. The first spouse’s unused nil-rate band can then be transferred to the survivor’s estate.
• The trust is taxed on the second death. The trust property is added to the survivor’s own estate when working out the tax, even though it passes to the first spouse’s children. The trustees pay their share of the tax out of the trust. Because the home then passes to children, the residence nil-rate band can often still be claimed, and stepchildren count as children for this purpose.

What a life interest trust cannot do

The trust does not take away the survivor’s right to claim under the 1975 Act if they are not reasonably provided for. It can also mean a long wait for the children: where the second spouse is close in age to the first spouse’s children, they may not inherit until late in life. Some families deal with that by giving the children something on the first death, using life insurance, or limiting the right to live in the house to a fixed period.

Unmarried couples: the gap is wider than most people think

However long a couple have lived together, and whether or not they have children, the law gives an unmarried partner far less protection than a spouse or civil partner. There is no such thing as a “common law” husband or wife in England and Wales.

If there is no will

An unmarried partner receives nothing under the intestacy rules. The estate passes to the deceased’s children or, if there are none, to parents, brothers and sisters and other relatives. A partner who lived with the deceased as a couple for the two years before the death can claim under the 1975 Act, but only for reasonable maintenance, and the claim must usually be made within six months of the grant of probate. It is a court process with no guaranteed outcome.

How the house is owned matters even more

If you own your home as joint tenants, it passes to your partner on your death by survivorship, with or without a will. If you own it as tenants in common and have no will, your share passes to your relatives under the intestacy rules. Your partner could find themselves co-owning their home with your parents, siblings or children.

Inheritance tax

Married couples and civil partners can leave everything to each other free of inheritance tax. Unmarried couples cannot, and three further rules widen the gap:

• No spouse exemption. Anything you leave your partner above your nil-rate band (currently £325,000) is taxed at 40%.
• No residence nil-rate band for your partner. The extra allowance of up to £175,000 applies only when your home goes to children, stepchildren, grandchildren or other direct descendants, not to a partner.
• No transfer of unused allowances. A widow or widower can inherit their spouse’s unused nil-rate bands, which is how a married couple leaving their home to their children can pass on up to £1 million free of tax. Unmarried partners cannot.

Survivorship does not help with the tax. If your home passes to your partner automatically as joint tenants, your half still counts in your estate.

The example ignores pensions, lifetime gifts and other reliefs. Tax on the house can usually be paid in instalments over ten years, with interest, but it still has to be paid, and in some cases the house has to be sold to pay it.

Pensions from April 2027

From 6 April 2027 most unused pension funds and pension death benefits will count as part of the estate for inheritance tax. Pension money left to a spouse or civil partner will still be exempt, but money left to an unmarried partner will not. For many couples with significant pension savings, this will make the difference between married and unmarried couples larger still.

What unmarried couples can do

• Make wills. This is the single most important step, because without one your partner may inherit nothing.
• Check how you own your home, and whether that matches what you want. If you contributed unequal amounts, record your shares in a declaration of trust.
• Plan for the tax. Life insurance written in trust can provide money to pay the tax without itself adding to the estate.
• Update pension nominations and the beneficiaries of any life policies, which pass outside your will.
• Consider marriage or civil partnership. It is the most effective way to remove the tax gap. Remember that marrying revokes your existing wills, so make new ones at the same time.

Should you put your house into a trust now?

The trusts described above are created by your will and take effect only on your death. Transferring your home into a trust during your lifetime is very different, and for most people it is not a good idea:

• It rarely saves inheritance tax while you live there. If you keep living in the house without paying a full market rent, the “gift with reservation of benefit” rules treat it as still part of your estate.
• It can create a tax charge straight away. Putting property into most trusts during your lifetime is immediately chargeable to inheritance tax at 20% on the value above your available nil-rate band, and the trust can face further charges every ten years.
• It may not protect the house from care fees. If a local authority concludes that you gave the house away to avoid paying for care, it can treat you as still owning it.
• There are practical hurdles. A mortgage lender must consent, and the trust must be registered with HMRC’s Trust Registration Service.

There are cases where a lifetime trust is the right answer, but it needs specialist advice first. A will trust achieves most families’ aims without these risks.

A checklist for couples

1. Find out how you own your home, from the Land Registry title and any declaration of trust.
2. Decide what you want to happen on the first death and on the second, for your partner and for each set of children.
3. Sever a joint tenancy if needed, at the same time as making new wills.
4. Make or update your wills, especially after marrying, remarrying or separating.
5. Choose trustees and executors who will be trusted by both sides of the family.
6. Review pensions, life policies and inheritance tax, particularly before the April 2027 pension changes.

How we can help

Thirsk Winton LLP’s private client team advises couples and blended families on wills, life interest and other trusts and inheritance tax. We review how your home is owned, prepare any notice of severance, and draft wills that protect your partner and your children.

For advice, please contact Salma Butt on 020 8505 4777 or at sbutt@thirskwinton.co.uk.

This article is for general information only and reflects the law at the date of publication. It is not legal advice and should not be relied on as such. For advice on your own circumstances please contact us.