Inheritance tax - unmarried couple

poppystar

SarahLu said:

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

Depending on your finances the problem might be worse than just losing the 40% - if there are not enough liquid assets to pay the IHT due the surviving partner may have to sell the family home to pay the IHT. This could make a difficult time much harder. 

bobster2

If you own a house - on what basis? If you are joint tenants rather than tenants in common then after the first death the surviving spouse would just become the sole owner. There would be nothing to pass over in a will.

SarahLu

Keep_pedalling said:

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.

Thank you for all the useful replies. Regarding the above point, so if we made a will first then married at a later date...would the marriage then override whatever percentages we had stipulated in the will and everything would go to the parents/siblings (depending on who was around) of the surviving partner? (assuming a new will wasn't made in the meantime, obviously).

Regarding property/tenancy type, we don't own yet but are looking to buy in 2024 so that is good to know. Is the tenancy type decided when applying for a mortgage, or at some other stage? (Appreciate this is not the property forum, so happy to ask over there if not appropriate to discuss here).

bobster2

SarahLu said:

Regarding property/tenancy type, we don't own yet but are looking to buy in 2024 so that is good to know. Is the tenancy type decided when applying for a mortgage, or at some other stage? (Appreciate this is not the property forum, so happy to ask over there if not appropriate to discuss here).

You tell your solicitor the basis on which you want to share ownership when they are preparing the forms for exchange/completion.

It gets specified on the TR1 (Transfer of title) document that gets sent to the Land Registry when the sale is completed.

SarahLu

bobster2 said:

SarahLu said:

Regarding property/tenancy type, we don't own yet but are looking to buy in 2024 so that is good to know. Is the tenancy type decided when applying for a mortgage, or at some other stage? (Appreciate this is not the property forum, so happy to ask over there if not appropriate to discuss here).

You tell your solicitor the basis on which you want to share ownership when they are preparing the forms for exchange/completion.

It gets specified on the TR1 (Transfer of title) document that gets sent to the Land Registry when the sale is completed.

Thank you.

doodling

Hi,

bobster2 said:

If you own a house - on what basis? If you are joint tenants rather than tenants in common then after the first death the surviving spouse would just become the sole owner. There would be nothing to pass over in a will.

True, but the survivor would still owe any IHT due on half the value of the property.

Joint tenancies don't avoid IHT.

bobster2

doodling said:

Hi,

bobster2 said:

If you own a house - on what basis? If you are joint tenants rather than tenants in common then after the first death the surviving spouse would just become the sole owner. There would be nothing to pass over in a will.

True, but the survivor would still owe any IHT due on half the value of the property.

Joint tenancies don't avoid IHT.

Yes - I should have pointed this out. Well it's almost half. If the surviving joint tenant is living in the property - you can reduce the value of the deceased share by 15% when calculating IHT - so you could owe IHT on 42.5% of the value of the property.

This is reduction is based on the recognition that the value of half of a property is less than 50% of the full market value (because people wouldn't pay so much for half a property if someone else is living there).

https://www.peterbarry.co.uk/blog/inheritance-tax-and-jointly-owned-property/

sheramber

SarahLu said:

Keep_pedalling said:

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.

Thank you for all the useful replies. Regarding the above point, so if we made a will first then married at a later date...would the marriage then override whatever percentages we had stipulated in the will and everything would go to the parents/siblings (depending on who was around) of the surviving partner? (assuming a new will wasn't made in the meantime, obviously).

Regarding property/tenancy type, we don't own yet but are looking to buy in 2024 so that is good to know. Is the tenancy type decided when applying for a mortgage, or at some other stage? (Appreciate this is not the property forum, so happy to ask over there if not appropriate to discuss here).

If you are in England, narriage nullifies any will madeprior to the marriage , unless you stipulate about the intended marriage in it.

Marcon

Brie said:

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.  

There's no IHT payable if everything is left to a surviving husband/wife/civil partner.

OP - being married can also help depending on the type of pension arrangements you and your partner have.

SarahLu

Marcon said:

OP - being married can also help depending on the type of pension arrangements you and your partner have.

Yes..the more we think about it the more it seems to make sense for lots of different reasons.