Should we get married?

maggiesoup

My partner and I have been a couple for 20 years but still live in our own respective houses. After watching Martin's programme this week about the many advantages of marriage or civil partnerships we've discussed it.  However, partner thinks as we don't live together we'd still have financial disadvantages if one of us died.  We're resident in Scotland.  Can anyone give any professional advice?  Thankyou 

Voyager2002

Financial disadvantages? Marriage would mean that either of you could inherit property from each other without paying inheritance tax. Most people would regard that as an advantage, but of course if you enjoy paying tax...

Emmia

Voyager2002 said:

Financial disadvantages? Marriage would mean that either of you could inherit property from each other without paying inheritance tax. Most people would regard that as an advantage, but of course if you enjoy paying tax...

And you can still keep your separate houses.

gwynlas

If you do not get married you llose out on spousal allowances if you want you can get LPAs for wealth and health should anything happen to either of you.

maggiesoup

Partner thinks that you can only say one of the houses is your main residence so the other, when sold if one dies, would attract some form of tax (CGT or IHT?) but i thought if we were married that wouldn't be the case?  

maggiesoup

Although in your answers above you have said that's not the case. Perhaps it's different law in Scotland? 

p00hsticks

maggiesoup said:

Partner thinks that you can only say one of the houses is your main residence so the other, when sold if one dies, would attract some form of tax (CGT or IHT?) 

I believe that's true - HMRC say that a married couple can only have one main residence for 'primary residential relief' purposes so there would be a potential CGT liability when you came to sell the one not nominated. 

You;d need to balance that against the fact that if you are proposing to leave your estates to each other, then if married the estate of the first would be exempt from IHT, whereas if not married there is only an allowance of (currently) £325k.  And on the second death, if married, the second estate inherits the nil rate band of the previously deceased spouse, so there is an allowance of £650k compared to £325 if not married (more if leaving property to children.

So you'd need to do the sums to work out the financial pros and cons of marriage v non-marriage. 
The other potential pro of marriage is if either of you has a Defined Benefit pension ,as these may well pay a pension  to a surviving spouse. (Some trustees do consider long term partners, but it may need a declaration made by the person with the pension made prior to their death, and it may be that not sharing the same residential address would exclude the case). 
  

Keep_pedalling

maggiesoup said:

Partner thinks that you can only say one of the houses is your main residence so the other, when sold if one dies, would attract some form of tax (CGT or IHT?) but i thought if we were married that wouldn't be the case?  

Living apart does add some complications as married couple can only have one primary residence. This will impact  council tax only one property can be classed as your primary residence so you will no longer be able to claim single occupant discount on whichever home that is and the other property will be classed as a second home so could be be subject to double the standard rate.

There is no downside as far as IHT is concerned, but whether it is worth doing depends on a number of factors. What is the value of each of your estates? Who are you leaving that to in your wills?

maggiesoup

Thanks to everyone, excellent information.  The two properties at present collectively would be around £1m. Also, to complicate matters further, I would wish my house to be left to my only child (partner has no objections  to this) 

Keep_pedalling

maggiesoup said:

Thanks to everyone, excellent information.  The two properties at present collectively would be around £1m. Also, to complicate matters further, I would wish my house to be left to my only child (partner has no objections  to this) 

As it stands getting married will not save any IHT if you were to die first. With your NRB and residential NRB means you can leave your son £500k IHT free anything over that would be taxed regardless if you were married or not. The same applies if your partner is not leaving their estate to you.

If on the other hand your partner plans to leave everything to you, £325 would be IHT free the rest would be taxable because there is no spousal exemption. If you inherit their estate then rather than being able to leave your son £1M IHT free you will still only have £500k available. 

maggiesoup

Thanks so much