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Couples inheritance tax

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Couples inheritance tax

helen gott Emsleys MMB Magazine Leeds working mum blogger
By Helen Gott , Head of Wills & Probate at Emsleys

Reunited and it feels so good?

Increasingly, we are seeing clients reconcile following a divorce. The often-used phrase ‘once bitten, twice shy’ might mean that when a couple reconciles, they don’t want to get married again.

That might work for the happiness of their relationship but something reconciling couples can overlook is inheritance tax and the effect of a reconciliation on their Wills.

One of the last few ‘tax breaks’ associated with marriage

One of the last few ‘tax breaks’ associated with marriage is the ability for spouses to pass wealth to each other without having to pay inheritance tax. This means that a wife could leave £2 million, for example, to a spouse, with no inheritance tax payable on that transfer. The executors of the second spouse to die may have to pay inheritance tax depending on the size of the surviving spouse’s estate.

This comfort or protection is often presumed by clients when they reconcile and it can come as a shock when they realise that in the absence of a new marriage certificate, they cannot transfer their wealth to their partner as simply as they did when they were married.

Inheritance Tax Liability

Take the case of a same sex couple who had a civil partnership, then married and subsequently divorced. As civil partners and then spouses, they could transfer their assets to each other without incurring any inheritance tax liability.

If the couple subsequently reconcile, they can leave £325,000 to each other but anything over that figure is taxed at the rate of 40%. If the first partner to die is worth £1 million, their surviving partner has to pay £270,000 in inheritance tax on the first partner’s death.

I am not an advocate for people making life decisions solely for tax reasons but if anyone is in the above situation, they should take advice to make sure they aren’t sleep walking into an inheritance tax problem.


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