Un-Married Couple and Inheritance Tax

whizzywoo

Please get married.

My Mother who died in her eighties was with her partner for over 30 years but they never married.  She was widowed at a youngish age and had 3 children.  She worked hard and scrimped and saved all her life.  

She had no other children with her long term partner and he does not have any children of his own but we call him our Stepfather.  Unfortunately we are not legally his Stepchildren.

Mum's share of their home is left to us 3 children with a lifetime interest to our "Stepfather" until he dies.  He has willed his half to us three children and hopefully he will still enjoy many years to come living there.

BUT because they weren't married and the property and land will probably be worth half a million there will be a shed load of inheritance tax to pay on it.  The whole value of the house will be included for IHT because "Stepfather" has a beneficial life interest to live there and they weren't married and we are not legally his direct descendants.

My Mother, God Rest Her Soul, would have been horrified if she had known and they would have definitely got married.

tightauldgit

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.

While you both technically own the house fully you cannot obviously own 200% of something financially between you. A 300k house can only be worth 300k for inheritance purposes, not 600k. So the value of your share is 50% of the value of the house. 

onomatopoeia99

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.   

A patient can nominate anyone they like to be "next of kin" on admittance or carry a next of kin card that states who treating clinicians should consult. It can be a lover, a friend, a neighbour, anyone you like.

The NHS has finally woken up to the fact that people have lifelong relationships that aren't formalised by a complex legal contract that has nothing to do with love, and indeed that many of its staff are in such relationships.

Even so, being the nominated next of kin by a patient gives no legal status as clinicians make decisions about treatment.

An example of such a card can be downloaded here: http://s3-eu-west-1.amazonaws.com/files.royalfree.nhs.uk/next_of_kin002.pdf

breakingwaves

There is a huge amount said for joining as spouses  or in a civil partnership.

My partner of more than 30 years died, unexpectedly, a few  hours short of our Civil Partnership ceremony. At that point I entered a world of pain.... not only was I grieving his loss but I also had to face the fact that his share of our combined assets would be liable for  a substantial amount of inheritance tax; organising the information required was a time consuming, expensive, and invasive process; I am still awaiting closure from HMRC effectively leaving me "in limbo" for many months, I'm hoping it won't be years.  His final salary pension also died with him. Please protect yourselves from this awful situation...

Polaris49

breakingwaves said:

There is a huge amount said for joining as spouses  or in a civil partnership.

My partner of more than 30 years died, unexpectedly, a few  hours short of our Civil Partnership ceremony. At that point I entered a world of pain.... not only was I grieving his loss but I also had to face the fact that his share of our combined assets would be liable for  a substantial amount of inheritance tax; organising the information required was a time consuming, expensive, and invasive process; I am still awaiting closure from HMRC effectively leaving me "in limbo" for many months, I'm hoping it won't be years.  His final salary pension also died with him. Please protect yourselves from this awful situation...

So sorry to hear that!

bunnygo

make life simpler and get yourself a civil partnership or marriage. Doesn't need frilly frocks, tons of food or a big party, just 15 mins plus some advance organisation. Civil partnership doesn't even need a cringy ceremony, just a signing. This also gives some protections in events other than death.

IMPORTANT; both will invalidate a previous will unless that will is suitably worded to anticpate the event.

Inheritance tax is perfectly reasonable between generations but partners need to work to avoid it.

VyEu

You're coming at it the wrong way.
Your estate is separate from your partner's if you're not married. 
The house is part of your estate
The flat and the house is part of your partner's estate
On YOUR death, if you are joint tenants, then your share of the property will auto pass to your partner. Your half share will be subject to IHT, but provided it's less than 325k (and you have not made any other large gifts during your lifetime which can 'eat into the NRB') then the rate of tax is 0%.
on YOUR death, if tenants in common, then your share of the property will pass to whomever you've left it to in the will. IHT as above
on YOUR PARTNER'S death, flat and his half of the property will be subject to IHT. If the combined value of the flat and the half value of the house is more than 325k (again provided no large gifts made beforehand) then everything above than is taxed at 40%. Flat and half share doesn't go to you automatically if you're not on the title on the former and a tenant in common in the latter.