Un-Married Couple and Inheritance Tax

Polaris49

Hi i'm trying to find some clarification on exactly what is subject to inheritance tax with un-married couples. 
My partner is buying into my house so we will jointly own it and have started a will to protect each other if one of us died.

He also has a flat in his name only and with everything together our 'estate' is around £500k.

If one of us was to die i know the other one would be subject to inheritance tax (what an absolute robbery!!) but exactly what is taxed? I know the threshold is £320k but Is it the full estate amount used to calculate it or 50% of the amount?

So would the full £500k be used (and as such mean inheritance tax is charged) or only £250k as it's half the estate?

I just can't find a straight answer! Marriage is looking more tempting the further in this i go ha ha!

RAS

You could also consider civil partnership?

DullGreyGuy

Will you be joint tenants or tenants in common?

If its joint tenants then legally you each own 100% of the property and the death of the first tenant just means the remaining tenants continue to own 100% (each if there were more than 2 to start with) and the property doesnt form part of the estate. That would only happen upon the death of the last tenant.

If its tenants in common you each own a specified percentage, in that case the percentage of the property that the deceased owned does form part of the estate. 

Polaris49

DullGreyGuy said:

Will you be joint tenants or tenants in common?

If its joint tenants then legally you each own 100% of the property and the death of the first tenant just means the remaining tenants continue to own 100% (each if there were more than 2 to start with) and the property doesnt form part of the estate. That would only happen upon the death of the last tenant.

If its tenants in common you each own a specified percentage, in that case the percentage of the property that the deceased owned does form part of the estate. 

Ah i see! We will be joint tenants!

Polaris49

RAS said:

You could also consider civil partnership?

Yeah maybe i should look into that more - i don't really know much about them! 

Keep_pedalling

DullGreyGuy said:

Will you be joint tenants or tenants in common?

If its joint tenants then legally you each own 100% of the property and the death of the first tenant just means the remaining tenants continue to own 100% (each if there were more than 2 to start with) and the property doesnt form part of the estate. That would only happen upon the death of the last tenant.

If its tenants in common you each own a specified percentage, in that case the percentage of the property that the deceased owned does form part of the estate. 

Even if the house is owned as joint tenants it is treated as part of your estate for IHT purposes.  

Assuming the assets are held 50/50 then neither estate would  be subject to to IHT. Once your individual assets exceed £325k or you have children then you should definitely look at marriage / civil partnership to take advantage of spousal exemption and transferable NRBs. 

Silvertabby

It's not just inheritance tax that you need to consider.  If either of you have any old style DB (final salary) pensions, they may only pay survivor's benefits to married partners.  If either of you is in hospital, and decisions have to be made, then the hospital may not take any heed of an unmarried partner's wishes.   

There are so many sad stories in the Press about long term unmarried partners being pushed out by (sometimes estranged) family members.

tightauldgit

Polaris49 said:

Hi i'm trying to find some clarification on exactly what is subject to inheritance tax with un-married couples. 
My partner is buying into my house so we will jointly own it and have started a will to protect each other if one of us died.

He also has a flat in his name only and with everything together our 'estate' is around £500k.

If one of us was to die i know the other one would be subject to inheritance tax (what an absolute robbery!!) but exactly what is taxed? I know the threshold is £320k but Is it the full estate amount used to calculate it or 50% of the amount?

So would the full £500k be used (and as such mean inheritance tax is charged) or only £250k as it's half the estate?

I just can't find a straight answer! Marriage is looking more tempting the further in this i go ha ha!

I think you are maybe confusing things slightly with your language. 

The total value of the estate is used for IHT purposes but the estate of each individual is only their share of the assets that they own. 

Keep_pedalling

Silvertabby said:

If either of you is in hospital, and decisions have to be made, then the hospital may not take any heed of an unmarried partner's wishes.   

There are so many sad stories in the Press about long term unmarried partners being pushed out by (sometimes estranged) family members.

Good point, as well as wills the OP and there partner need to put lasting powers of attorney in place, an accident or serious illness can lead to disastrous consequences especially for unmarried couples.

Polaris49

tightauldgit said:

Polaris49 said:

Hi i'm trying to find some clarification on exactly what is subject to inheritance tax with un-married couples. 
My partner is buying into my house so we will jointly own it and have started a will to protect each other if one of us died.

He also has a flat in his name only and with everything together our 'estate' is around £500k.

If one of us was to die i know the other one would be subject to inheritance tax (what an absolute robbery!!) but exactly what is taxed? I know the threshold is £320k but Is it the full estate amount used to calculate it or 50% of the amount?

So would the full £500k be used (and as such mean inheritance tax is charged) or only £250k as it's half the estate?

I just can't find a straight answer! Marriage is looking more tempting the further in this i go ha ha!

I think you are maybe confusing things slightly with your language. 

The total value of the estate is used for IHT purposes but the estate of each individual is only their share of the assets that they own. 

Yes but with being joint tenants on our main house technically we both own 100% of the house. So if a £300k house is used as an example when it comes to an estate i want to know if you class the full 100% or if it would be half of that as the other person still lives.

Keep_pedalling

Polaris49 said:

tightauldgit said:

Polaris49 said:

Hi i'm trying to find some clarification on exactly what is subject to inheritance tax with un-married couples. 
My partner is buying into my house so we will jointly own it and have started a will to protect each other if one of us died.

He also has a flat in his name only and with everything together our 'estate' is around £500k.

If one of us was to die i know the other one would be subject to inheritance tax (what an absolute robbery!!) but exactly what is taxed? I know the threshold is £320k but Is it the full estate amount used to calculate it or 50% of the amount?

So would the full £500k be used (and as such mean inheritance tax is charged) or only £250k as it's half the estate?

I just can't find a straight answer! Marriage is looking more tempting the further in this i go ha ha!

I think you are maybe confusing things slightly with your language. 

The total value of the estate is used for IHT purposes but the estate of each individual is only their share of the assets that they own. 

Yes but with being joint tenants on our main house technically we both own 100% of the house. So if a £300k house is used as an example when it comes to an estate i want to know if you class the full 100% or if it would be half of that as the other person still lives.

It will be 50% but if the estate is well under the NRB an IHT return is unlikely to be needed and probate will not be required for the house.