There are, of course, lots of reasons why people choose not to get married. In fact, as the old adage goes, “marry in haste, repent at leisure”! However, that’s certainly not to suggest that the legalities of living together shouldn’t be formally addressed, particularly with issues such as Wills.
In this article we take a look at the importance of making a Will, even if you choose not to marry your partner (or indeed, ‘repent at leisure’!).
What would happen if I died without a Will and hadn’t married?
Basically, in this type of scenario your partner wouldn’t receive any of your assets, regardless of how long you might have lived together (and let’s not forget that many ‘unmarried’ couples stay together much longer than ‘married’ couples do!)
Many people believe that the length of a relationship automatically means that assets and property would simply ‘transfer’ over to their partner but this simply isn’t the case. If there’s no Will to suggest otherwise then the remaining partner receives nothing under the Intestacy Rules.
So who would receive my assets?
If there’s no Will then your assets would pass over to any children. If there aren’t any children then they’d go to your parents. Either way, your partner wouldn’t receive anything – including any property you might have owned and/or lived in. This obviously has great potential to cause problems and your partner could easily find themselves fighting for financial provision under the Inheritance (Provision for Family and Dependants) Act 1975. Certainly not a good position to be in – and don’t forget about the associated legal fees!
What if we married?
If you’re married with no children then your partner would inherit everything and the ‘estate’ (i.e. whatever you leave behind) would be free of Inheritance Tax under provision of the ‘Spouse Exemption’.
If, on the other hand, you’re married with children and the estate is worth more than £270,000 then half of what’s left will usually pass to the children. If the share passing to them is worth more than £325,000.00 then there may well be Inheritance Tax to pay as well.
Unfortunately the implications don’t stop here. If the ‘children’ are over the age of 18 and therefore classed as ‘adults’ they can also opt into a Deed of Variation which basically redirects the estate. It perhaps goes without saying that the importance of seeking professional advice can never be underestimated; whether you’re married or not.
What about taxes?
Of course, with estates comes taxes! As we’ve already seen, if you’re married and leave everything to your partner then the estate will be free from Inheritance Tax. When your partner then dies (and let’s say, leaves everything to the children), then two nil rate bands will be made available to them before the estate is charged at the standard rate of 40%.
If, however, you weren’t married – and leave everything to your partner – then Inheritance Tax will be payable on your death and then again on their death. The tax man is basically a winner!
Whilst the purpose of this article most certainly isn’t to ‘talk you into’ marriage(!), it can certainly save a lot of money in terms of Inheritance Tax – and that’s exactly why many people choose to marry when death is expected. A fine example of this is the comedian Sir Ken Dodd who married his long-term partner, Anne Jones, just two days before his death. She’s reported to have saved a massive £2 million in Inheritance Tax! (Not bad for someone also charged with tax evasion in 1989!)
And there’s more!
From a Capital Gains perspective, any transfers between married couples are tax neutral whereas unmarried couples don’t have the same luxury. Why? Because any such transfers will be liable to Capital Gains Tax and retrospectively caught for Inheritance Tax if made within seven years of death. Yet again, the tax man gets to rub his hands!
Our advice?
As you’ve probably guessed, Wills and taxes are a somewhat complicated area of law and should never be underestimated. For this reason, we’d certainly stress the importance of gaining professional advice on both aspects to ensure that your assets are properly protected, whether you choose to marry – or not!
