From separate homes to cohabitation and marriage
seacaitch
Forumite 271 Posts
I was a little unsure where to post this, as there are relationship, legal and tax aspects, but here goes...
My partner and I, who've been romantically involved for many years but lived separately ("A"), have decided to move our relationship forward by finally cohabiting, getting married and combining our finances ("B"). Better late than never. Romantic old me is thinking about the order in which we might proceed, to ensure we're acting in a sensible manner with respect to tax and other legal aspects, avoiding unexpected surprises. So, a bit of sanity check if you will as I'm well out of my sphere of knowledge here...
My partner and I, who've been romantically involved for many years but lived separately ("A"), have decided to move our relationship forward by finally cohabiting, getting married and combining our finances ("B"). Better late than never. Romantic old me is thinking about the order in which we might proceed, to ensure we're acting in a sensible manner with respect to tax and other legal aspects, avoiding unexpected surprises. So, a bit of sanity check if you will as I'm well out of my sphere of knowledge here...
Current Situation:
* We each have our own homes (in separate towns), ie. we have (genuinely) separate PPRs at present
* I have a will in which my partner is the main beneficiary, and she's named as the sole beneficiary of my pension
* She has no will, but I'm named as the sole beneficiary of her pensions
Currently, significant IHT bills would be payable by our estates if either of us died.
Outline Plan:
* Sell my PPR and I move in with my partner in her PPR - this is imminent as my PPR is now up for sale
* We get married shortly thereafter (with a side effect of revoking my earlier will)
* We distribute my home sale proceeds across various accounts (such as ISA, Pensions, GIAs, savings accounts etc) held by both of us
* We create new wills
* Other stuff, not yet considered...!
The thought here being that by selling my home as the initial step, this removes any question about its status as my PPR. However, there's a risk that if my partner died intestate in the window between me selling my home and us marrying, I'd become homeless if/once her estate beneficiaries eventually turfed me out of her house.
Do the steps above sound like a sensible way for us to get from A to B? What other things should we be thinking of? I'm sure there are many. All input appreciated, as this is a large step into the relative unknown for us both...
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if you are distributing the proceeds of your house sale between you then she should also make you a joint owner of her house.
Do either of you have children from previous relationships?
1. Neither of us has children.
2. I see the sense in bringing forwards the wills ASAP, with "in contemplation of marriage" stipulated, else in my case there'd be a gap between our marriage date (revoking my current will) and me writing a new one; in the event of my death during this gap period, this presumably would result in my partner (by then my wife) inheriting *everything* of mine, which she wouldn't actually need - and she agrees - as my estate would be quite large, hence my current will having her as the primary beneficiary, but with other relatives of mine (siblings etc) also benefiting to a lesser degree.
3. Her having a will pre-marriage would provide me with some additional security though, namely in that it could provide me with the continuity of a home in the event of her death occurring after my house sale but prior to our marriage. Financially speaking, that tragic event wouldn't be problematic for me, but I could foresee that it would be emotionally devastating to lose my partner of many years while also being made homeless after having just sold my own long-standing home (that I'm rather attached to, but need to let go for us to move forward as a couple) and having no legal right to stay in her house (by then my home, but me having n o claim on it) following her death. There are no health reasons to think such an outcome's likely, but guarding against low-probability, high-impact events is the very reason why for a long time now I've had a will substantially benefiting her so as to protect her should it occur.
4. I've assumed that it's sensible for me to delay distributing my house sale proceeds into her accounts until after our marriage, as I can foresee various risks (inc IHT implications, her siblings ending up with my money, etc), magnified by her present lack of will benefiting me, in the event of the death of either of us occurring after me "gifting" a chunk of my house proceeds to her before our marriage occurred. It seems more sensible therefore for me to distribute my house sale proceeds into her accounts only after our marriage has occurred. Is my thinking sound?
5. What's the legal mechanism for her to make me a joint owner of her house, and what's the benefit of me becoming the joint owner if we've married by that point? Is this about ensuring that the house became mine in the event of her death, rather than it being something her will might otherwise stipulate went to other beneficiaries?
Thanks for the input so far - it's already helping to clarify things. I realise some of the above can sound quite clinical, but this step forward that my partner and I are making together is in part aimed at increasing both of our security, particularly with an eye on planning ahead for later in life, so it's important we plan and go about this correctly.
Putting it into joint names might be helpful in terms of IHT in the very long run, depending on the total values of your estates and which order you die in.
It certainly makes life simpler in the event she were to die first.
It may be helpful on a practical level between the two of you for you to start to think of t as you joint house, rather than hers, and in terms of both of you feeling that you dealing fairly with assets f you are planning to transfer funds from the sale of your house to her or to joint accounts, then it makes sense to put the other property into joint names as well. If she has a mortgage at present, then it may be sensible to use some of the house sale proceeds to reduce or pay off that mortgage at the same time as putting your name on the deeds.
It would also protect you in the (presumably unlikely) event of her becoming bankrupt or having significant debts, in the future as creditors would only have a claim against her interest in the house.
The mechanism depends a bit on whether there is a mortgage o not.
If not, then it is what is called a transfer of equity - a TR1 form transferring the property from joint to sole names, signed by both of you and sent t the land registry,.
If there is a mortgage then she would need the consent of the lender, and they would be unlikely to grant it unless the mortgage was also going into joint names (in which case technically you would be re-mortgaging and paying off the new mortgage, but for practical purposes the lender might well be willing to offer a new mortgage on the same terms as the old, if the only change you were asking for was to add your name. Then the same as before - transfer of equity, re-register the property and the lenders change.
Third option would be a deed of trust saying that she remains the legal owner but you and she are joint beneficial owners (- this might be the way if there's a mortgage and they won't consent to adding you and there are reasons not to want to remortgage (e.g. if she has an incredibly goof deal which the mortgage lender won't agree to add you to)
Then you would add your name when you pay off the mortgage , or remortgage, or on the next house if./when you move.
A very useful post, TBagpuss - thanks.
There's a small outstanding mortgage coming towards the end (Aug-2023) of a fixed rate, with redemption penalties prior to then. Our original plan had been that at the end of that fixed rate term the outstanding debt would be settled penalty-free. On the face of it that would seem to be the simplest way forward, but with the additional step of us performing the transfer equity from sole to joint then also.
The approximate timescales here might be that my house sale completes in say June-2022, we marry in July/Aug-2022, allowing me to then distribute house sale proceeds across both of our accounts, with the transfer of her (now our!) house, as described above, occurring ~12 months later.
I don't fully follow what risks might present themselves in that intervening 12 months period, particularly the IHT aspect, should "events" occur in that window prior to me becoming a joint owner of the house, and thus it's tricky to make a judgement call on whether it would be worth following one of the options you outline. I think I understand the bankruptcy angle, and theoretically that would be possible if she were to be sued by a client in relation to her sole-trader work, but we are in the realm of very low probabilities here (though I fully understand that low probability but high impact is exactly what I'm seeking to mitigate against here so as to avoid being an unwitting high-stakes gambler!).
It seems like speaking to the lender as an initial step appears sensible, to see what if anything might be achieved at low-to-no cost (your second option above), and then to take things from there: hence, either
(1) decide to wait until Aug-2023 to perform the transfer when the mortgage has been settled, once I've a clearer understanding of the risks of waiting that long and whether they seem acceptable; or
(2) deal with the lender once we marry if the costs of the necessary changes seem acceptable (or minimal); or
(3) else once married pursue the deed of trust option that you suggest.
I would suggest your priorities should be to get the wills sorted, and then do the deed of trust to carry you through the 18 months till the mortgage is redeemed (I don't see why you would have to wait till you were married to do this). When the mortgage is redeemed (and the mortgage company has updated the Land Registry) you can then do the transfer of title.