UHY Ross Brooke Chartered Accountants

IHT – Should we get married?

accountant for wills, probate IHT and estate planning

Michael BrookeThere are many reasons why couples get married but tax and inheritance rarely feature high on the list. Yet, as a tax adviser, I frequently find myself saying to clients that they really should marry their partner as so much can be at stake if they don’t. Usually, eventually and sometimes reluctantly they do!

By Michael Brooke

Tax is always a consideration but of particular note, are the issues that arise around inheritance. A valid Will is always the most important aspect as it ensures that an estate is inherited by the person you want to inherit. If there is no valid will then an estate is distributed according to the laws of intestacy and if the surviving partner is not the spouse or civil partner of the deceased, then they get nothing without applying to the Court which can be very costly as well as time consuming and contestable. It is unpleasant and, quite frankly, can be avoided very simply.

One of the most important reliefs in UK taxation is the spousal exemption. This also applies to civil partners and exempts from IHT any transfers or legacies (note there are different rules for non-domiciled partners) from one to another on death. Inheritance tax starts at a taxable estate of £325,000 and is charged at 40% above this.

So for example, a £2m taxable estate left to a surviving partner or civil partner would pay no tax but if left to lifelong partner but with no legal status then there is a bill to pay of £670,000 which is completely unnecessary.

This is all before we consider the numerous estate planning opportunities that revolve around the spousal exemption such as life interest trusts to protect the inheritance from predators, legacies to maximize the residential nil rate trust, capital gains tax planning and maximizing business property relief and much more.

The next steps

For more information, please contact Michael Brooke.

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