United Kingdom: Sisters and inheritance tax

Abstract

Joyce and Sybil Burden are two sisters who have lived together since birth and currently occupy a UK farmhouse. When one of them dies the other will face a large inheritance tax bill and will have to sell the house to meet the cost. The sisters, Joyce, aged 88, and Sybil, aged 80, want the law changed so that cohabiting siblings have the same rights as married couples, which exempts the surviving half from inheritance duty. After the Civil Partnership Act 2004 granted the same rights to gay and lesbian couples as applied to married couples but not to cohabiting family members, they decided to act. The sisters’ situation is relevant to the use of trusts for holding shared accommodation. Their case was due to be heard before the European Court of Human Rights in Strasbourg on 12 September 2006. Julian Washington, private client partner with Mayfair law firm, Forsters LLP, commenting on the situation, writes: This issue was raised during the passage of the civil partnership legislation through Parliament. A number of opposition peers tried to amend the Civil Partnership Bill (as it then was) in the House of Lords to extend the privileged tax treatment of civil partners and spouses to carers and other relatives who live together. The ‘elderly spinster sisters’ is the oft-quoted exemplar of cohabitants who do not qualify for any special tax treatment and who, as a result, may face difficulties when one of them dies. The House of Lords amendments were rightly voted out of the Civil Partnership Bill (because this is a quiet different issue from the legal recognition of same-sex relationships) but, at the time, the Government said it would look at the position of cohabitants like the Burden sisters. In fact, on 31st May the Law Commission published its consultation paper ‘Cohabitation: The Financial Consequences of Relationship Breakdown’. This paper specifically excludes blood relatives and carers, concentrating on the position of what are colloquially known as ‘common law’ spouses. In other words, there are no signs of any progress for people like Joyce and Sybil Burden. The only comfort for them may be that the existing law allows inheritance tax attributable to houses and land to be paid in ten annual instalments (plus interest). By contrast, the tax attributable to other assets has to be paid at the time of probate.