A light hearted look at a very important subject — what are the Inheritance Tax benefits of marriage !

Dear Legal Eagle,

A few months ago, I had the proposal of my dreams. The solitary diamond glittered in the moonlight as the love of my life went down on one knee on a deserted beach. I accepted him without hesitation. But I ’ve overheard a few of his conversations recently and now I ’m wondering: Does he love me… or is he just doing it for the tax benefits?

Please help!!

Legal Eagle says –

Your boyfriend is wise to be aware of the many tax benefits which come from being married.

If he dies after you marry he will be able to leave you everything he owns without any inheritance tax being charged at all.

There’s even better news to come. If the two of you marry, and he dies leaving everything to you, your own estate will benefit after your death. Your estate should be able to claim double the normal tax-free rate of £325,000, allowing you to leave £650,000 free of tax – and even more if these rates have gone up by the time you die. In the best circumstances (say you leave a house and children), the two of you may be able to increase this tax-free amount to a million pounds.

The position could be much, much worse if he dies and you have not married. Then, not only could tax be charged on everything he leaves to you in excess of £325,000 (including his share of the house), but also you will only have a single tax-free amount of between £325,000 and £500,000 on your own death.

Imagine the two of you have children together; he dies first and then you die some years later. Suppose that you have assets of £500,000 each – he leaves everything he owns to you and you then leave the whole lot to the children. There may be no tax to pay at all if you are married. But if you are unmarried, there could be a tax bill of £70,000 on his death and a tax bill of £172,000 on your own death.  That’s a total of £242,000 going to the tax office instead of to your children – a hefty amount!

Add to this the ability of married couples to pass assets to each other without attracting a charge to capital gains tax (so that both annual exempt amounts can be used) and you can start to see some of the opportunities for financial planning between spouses.

 So it seems that the pair of you have found a rare combination of romance and financial astuteness. Legal Eagle hopes for an invitation to the wedding and wishes you much happiness in the years to come.

 For more information, please call us on 01689 822554.

 

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