Inheritance Tax and Marriage
Earlier this month saw the death of comedy legend and self-proclaimed 'failed accountant' Sir Ken Dodd.
One of Dodd's final actions prior to his death was to marry long term partner Anne Jones, a move which may save and will certainly postpone an inheritance tax liability of almost £3 million on his reported £7.2 million estate.
Whilst this may not have been the main purpose for the marriage, or even a consideration at all, it does highlight the substantial difference in tax treatment between married and unmarried partners.
Under current rules, UK domiciled married couples and civil partners are able to transfer assets to each other during their lifetime or on death, without creating an inheritance tax liability, regardless of the value.
However, unmarried partners, whether living together or not, do not benefit from the same exemption. Often this will result in a higher overall inheritance tax liability, with at least part of that liability due at an earlier stage. This could have a serious impact on the surviving partner's standard of living e.g. they could be forced to sell the family home.
I would never advise getting married just to reduce inheritance tax but the saving could pay for one very extravagant wedding!
It is not always the case that unmarried partners will suffer a higher Inheritance Tax liability but typically a greater deal of planning is required to ensure their estate/Wills are structured in the correct manner.
If you would like to discuss your own inheritance tax position then please get in contact with your local Perrys branch.
Article written by Craig Harman