Inheritance tax - unmarried couple

SarahLu

My partner and I are going to set up (long overdue) wills. We are unmarried. No kids - that won't change now. We want mirror wills set up to leave everything to each other, then split various percentages between various family members upon death of the second person. I have just been reading about inheritance tax..am I right in saying that upon death of the first one of us, there would be IHT taken before the other partner got the estate? (On the amount over and above the threshold, obviously). But if we were married, there would be no IHT? Is that correct?

We have been together 15 years+ and have toyed with the idea of getting married before, but we both agree we may take the plunge if this is indeed the case  We plan to stay together and seems silly to lose 40% of what we have worked for for the sake of signing a piece of paper. Or are there other ways around it, i.e a trust? Don't know much about those so not sure if that would work just as well. Would appreciate any advice or experience of anyone in a similar situation who has made a will?

Thanks.

Brie

Not that there would be no IHT if you were married but there would certainly be less in that you can transfer some to the surviving partner.  And as difficult as marriage can be that bit of paper does solve a number of issues.  If you've got the "putting up with each other long term" bit sorted then it's just a practical way of managing life.  

Jowwie

My understanding of unmarried couple is the allowance on first death before IHT is just the £325k. There is no additional £175k property allowance. If "marriage" is not something you want to do then you should consider civil partnership - much the same benefits regarding inheritance tax but sounds different.

If you are getting your Wills done with a local solicitor they should be able to advise you on the IHT implications.

Keep_pedalling

The alternative is to become civil partners which will also get spousal exemption on the first death. It is important that if you do plan to marry or become civil partners that any will you make now is made in contemplation of marriage / civil partnership otherwise you will need to make new ones once you have married or formed a civil partnership.

If either of you has over £325k in assets it would be silly not to do this. You should also put lasting powers of attorney in place if you have not already done so.

km1500

Just to say on BBC news today was speculation IHT would be abolished in the budget on March 6th next

Mojisola

www.which.co.uk/money/tax/inheritance-tax/inheritance-tax-for-married-couples-and-civil-partners-avZv40Q1k94y

"There are major benefits to being married or in a civil partnership when it comes to inheritance tax.

Transfers between married couples and civil partners are not usually subject to inheritance tax (IHT), so if the first partner to die leaves their entire estate to the other, no tax will be payable."

badmemory

km1500 said:

Just to say on BBC news today was speculation IHT would be abolished in the budget on March 6th next

I read this too.  However, the budget, the election & IHT being ended by law before is a trisk I wouldn't want to be taking.  Too many things were supposed to have become law that never actually did.

p00hsticks

km1500 said:

Just to say on BBC news today was speculation IHT would be abolished in the budget on March 6th next

There is speculation before pretty much every budget that IHT allowances will be raised or IHT will be abolished - I wouldn't put too much store into it.

km1500

I agree but the only reason I mentioned it is if you are thinking of getting married to avoid IHT you might want to wait until after the budget!

That said, if anybody asked me my opinion it would be that something will happen on IHT in the budget although maybe not complete abolition

MDMD

km1500 said:

Just to say on BBC news today was speculation IHT would be abolished in the budget on March 6th next

There’s also a probability that if labour win the the election they may reverse any abolition 

poppystar

Jowwie said:

My understanding of unmarried couple is the allowance on first death before IHT is just the £325k. There is no additional £175k property allowance. If "marriage" is not something you want to do then you should consider civil partnership - much the same benefits regarding inheritance tax but sounds different.

If you are getting your Wills done with a local solicitor they should be able to advise you on the IHT implications.

The residential £175k is only applicable where the property is left to direct descendants so not applicable in this case as there are no children.