The current law is a "crazy paving" of different provisions which
leaves families facing a "confusing, costly and emotionally-exhausting legal process", the Commons Justice Select Committee said.
The report comes after families of missing
people, including a woman whose husband disappeared after a night out in Manchester almost nine years ago, appealed to MPs to reform the law.
Vicky Derrick said she had found it "extraordinarily difficult" to sort out her financial affairs since her husband Vincent vanished in August 2003.
Sir Alan Beith, the committee's chairman, said: "We do not agree with Government Ministers who claim the system is working 'adequately'.
"The evidence we have heard from families faced with the problems
of resolving these affairs is overwhelming. The law needs to be changed.
"The Government owes it to these families to look at this issue again very carefully before it responds to our report."
He added: "In some cases missing
people have been held to have died in order to dissolve a marriage, while remaining technically alive in the eyes of mortgage lenders and other agencies."
Sir Alan called for legislation to be brought forward for England
and Wales in the next parliamentary session, based upon the Scottish Presumption of Death Act 1977.
A new Presumption of Death Act, based on the Scottish model, would only allow families to apply for a presumption of death order after seven years.
The MPs said the Government should introduce so-called guardianship orders to allow families to maintain the person's estate during these years by cancelling direct debits such as gym membership, paying off any debts, and providing maintenance for any dependants.
The report, which found that many of the problems appeared to be due to the "piecemeal nature of the relevant law", also called for the Government to produce clear guidance for families on the law and processes in this area.
Martin Houghton-Brown, chief executive of the Missing
People charity, said: "It is now time for the Ministry of Justice to step forward and end this suffering once and for all, with a commitment to a Bill in the coming Queen's Speech."
Ann Coffey, chairwoman of the All-Party Parliamentary Group for Runaway and Missing
Children and Adults, added: "No family should have to go through such an emotionally exhausting and confusing legal process in addition to having to cope with the loss of a loved one."
Giving evidence to the MPs last November, Mrs Derrick said her life has been on hold for eight years.
"I have gone from having a joint income of a husband that earned far more than I earned to being a single mum overnight on a greatly reduced income," she said.
"I have just basically been expected to be able to get on with it. There really is no help out there for people in my situation."
She added she was lucky to have a supportive family to help meet mortgage repayments.
Rachel Elias, the sister of Manic Street Preachers guitarist Richey Edwards who went missing in 1995, has also said that families often face "a painful struggle against bureaucracy".
She urged the Government to "take some very simple steps to ease unnecessary heartache and confusion".
And Peter Lawrence, the father of missing chef Claudia, said most institutions have no system in place for clients who go missing.
Mr Lawrence, whose daughter went missing
from York in March 2009, said families have no simple way to deal with unresolved practical issues such as property, bank accounts and insurance because it was impossible to prove whether a missing person was dead or alive.
"The Government should not underestimate the effect that trying to deal with finances, insurance policies, bank accounts and mortgages of our loved ones has on families already at their lowest possible ebb,"
he said.
A Ministry of Justice spokeswoman said: "We recognise the emotional and practical difficulties faced by those whose loved ones are
missing and thought to be dead.
"We are already working to improve guidance relating to coroners' inquests where a person is missing and presumed dead and will look at other areas where guidance could be improved.
"We will carefully consider all the recommendations from the Justice Select Committee and will respond shortly."
Mr Lawrence welcomed the report and said there was a "great momentum" for a change as the public began to understand the problems many families of missing people faced.
Speaking at a press conference in York, Mr Lawrence spoke of some
of the difficulties he faced as he tried to deal with his daughter's financial arrangements after her disappearance nearly three years ago.
He said: "I think the main problem is always dealing with banks and bank accounts. Just one example in Claudia's case is one bank would just not move money from one of Claudia's accounts to another of Claudia's accounts.
"We weren't asking them to move it anywhere else, but 'sorry, you are not our customer'.
"A lot of families around the country are in the position where because the breadwinner is missing they are having to try and make up mortgage payments somehow or another."
Mr Lawrence, a solicitor from North Yorkshire, was speaking as the family prepared to mark Claudia's 38th birthday on Monday.
He added: "These milestones, or events, seem to come around with rapidity. Since Claudia went missing I can hardly believe it is nearly three years, which is the next anniversary, and also her birthday coming up on Monday.
"It is always a very distressing time for the family. We so miss Claudia and have always been with her on her birthday. It is of course very distressing."
PA
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