The IHT Wedding
Whilst, of course, marriage always has been the bulwark of family life in the UK, it is also true that traditional family structures have changed dramatically since the Second World War and, in particular, there has been a great growth in what is known as “common law” partnerships.
Indeed, many of us know unmarried couples who have often been together for decades with children, perhaps grandchildren and to all intents and purposes living in exactly the same manner as their friends and family who are married.
However, there is one vital area, where the unmarried couple are very much at a disadvantage to their married counterparts. This is in respect of the working of Inheritance Tax (IHT).
To cut a long story short, if a married partner dies and leaves their assets to their surviving spouse, the gift is entirely tax free for inheritance tax purposes. On the other hand, if an unmarried partner dies and leaves their estate to their surviving partner, the value of any gift over the current IHT nil rate band of £325,000.00 will be taxable.
As an example, if a married partner died leaving assets to their surviving spouse totalling £625,000.00 (a house or investments), there would be no IHT payable.
If an unmarried partner left the same assets to their surviving partner, there would be IHT payable of £120,000.00 (40% x £300,000.00).
In reality, if an unmarried couple have built up significant assets between them, it would be clearly beneficial from a tax point of view to get married.
I am personally aware of clients who were invited to lunch with long term unmarried friends of theirs and as an aperitif were invited as witnesses at their friends “IHT Wedding” at the local Registry office. It appears that no one else in the couple’s family were aware of the marriage and life carries on as normal.
Of course, one does not have to be quite as practically efficient as this but clearly there is a strong tax argument for long-term unmarried couples to get married.
Although, marriage is not the end of the story and at Solomons we have the specialist knowledge will be happy to assist you with your will and Trust planning as appropriate to your circumstances.
If you would like any further information on what is covered in the article or have a question please do not hesitate to call us on 01202 802807 alternatively email firstname.lastname@example.org.