Inheritance law is failing modern families

In defence of those who make laws – or indeed write wills, or set up trusts – the pace of change has been extraordinarily rapid. Who could have predicted even a decade ago that in the UK, same-sex partners would today account for one in 35 marriages? ² Or that the marriage rate would decrease while the divorce rate increased, to the point where in 2019 there were 1.9 million marriages in the EU, and 0.8 million divorces? ³ Or that an estimated 8 million babies globally would have been born through non-traditional conception such as IVF? ⁴

However, it is terribly sad that this social shift means some relatives are now finding themselves excluded from their family inheritance on a technicality. Meanwhile, with protections for non-traditional families still very patchy around the world, those who wish to leave their loved ones in a financially secure position may struggle to do so.

The situation is especially urgent in relation to cohabitees. Living together without getting married has become a very common lifestyle choice – perhaps so common that people assume they will have protection. In reality, with the notable exception of Australia and New Zealand, in most jurisdictions cohabitees will receive nothing if their partner dies intestate.

Modern families have changed enormously – with cohabitation, LGBTQ+ relationships, stepchildren, adoption and surrogacy all common – and inheritance law has not kept up.

We have seen this leave people really badly off – for example, a bereaved same-sex partner in the US can find themselves being turned out of their home at an already distressing time. In one case, a British woman who had nursed her partner of 25 years through a terminal illness was left with nothing.

One positive is that we are starting to see the European Convention on Human Rights (ECHR) having an effect on the interpretation of wills and trusts. As lawyers this means that we may be able to secure the court’s help to include members of a modern family who might otherwise be left out.

One notable UK case⁵ related to an employee benefit trust created by the founder of Walker Books, a children’s book publisher, to hold shares for its employees, their spouses and children. When the business was sold, families argued that “spouses” should include civil partners and same-sex spouses, and “children” should include stepchildren.

The judge decided that same-sex and civil partners were spouses, since to exclude them could be considered discriminatory under the ECHR. However, stepchildren would not be considered children because, unlike illegitimate and adopted children, there is no UK law protecting their rights.

To some, this may have felt unfair. But the good news is that where there are discrepancies, courts are now allowing trusts some flexibility on who can benefit. In one case we handled in the Channel Islands, trustees applied to vary a trust to be more inclusive of the shape of the modern family. Although the settlor would likely have opposed this, we persuaded the court to agree.

There are plenty of other examples where we have been able to get a good outcome. But what families really need is solid legal protection, such as that provided to illegitimate children in the UK (but not, unfortunately for Damian Hurley, in the US).

It is frustrating to see that reforming legislation that would give UK cohabitees more rights does not seem to be progressing. The situation is even worse for couples in other countries such as China, where cohabitation is still illegal (though recently decriminalised), and the UAE, where it has only just been legalised.

Lawmakers should also be considering better protection for illegitimate children, who are still reliant in many jurisdictions on a parent recognising them. And while stepchildren are a difficult class to define – covering everything from blended families to a spouse’s adult children – ignoring them in law is causing unfair outcomes in real life.

The situation requires urgent action – not least since there are many more social changes occurring that will create even more complex issues around succession. If a country cannot ensure that millions of long-term cohabitees can inherit from one another, it stands little chance of protecting surrogate children, or handling situations where embryos created through IVF are part of an inheritance.

In the meantime we are working case by case, doing our best to challenge discriminatory wills and persuade courts to vary trusts so that members of modern families do not lose out because of antiquated rules.

The situation requires urgent action – not least since there are many more social changes occurring that will create even more complex issues around succession.