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Can someone summarise the actual legal /financial disadvantages of being unmarried couple with dc

(8 Posts)
fabhead Mon 27-Jul-09 19:10:24

if the father has full Parental Responsibility for all dc (i.e on birth cert 2004 onwards) and property owned as beneficial joint tenants and each other partner indicated on death in service/pension expression of wishes?

Something to do with Inheritacne Tax?

In a nutshell please?

(am updating wills post-dc and wondering whether we do actually need to get married now)

thanks

paisleyleaf Mon 27-Jul-09 19:15:22

There might be useful stuff here
or here

paisleyleaf Mon 27-Jul-09 19:19:03

Maybe worth looking into widows allowance too
I know my mum never qualified for it. Having lived with my dad for 30yrs and not claiming single parent benefits when we were little as they were together she was a bit upset.

wonderingwondering Mon 27-Jul-09 19:24:38

Anything other than your jointly owned house and death in service benefits would pass to next of kin, which if you aren't married, would be your children and, over a certain amount (racking brain - £120k?) then parents/siblings. So you definitely need a will.

If your assets - other than the jointly owned home and death in service benefits - are significant, you need to think about tax planning, as you may be liable for inheritance tax. I think the tax comes in at around £350k. It doesn't apply when assets are passed between spouses on death of one of them, and if you are married you can roll up your joint allowances so you can pass £700k or thereabouts tax free to your children.

That may be slightly out of date but that's my understanding, in a nutshell. And if you marry, your will becomes void and must be re-done.

wonderingwondering Mon 27-Jul-09 19:26:16

The first line of my post refers to what would happen if you die without a valid will. You can obviously choose to leave money/property to anyone, next of kin or not, through your will.

Need my dinner, brain works better when fed.

fabhead Mon 27-Jul-09 19:37:44

I knew what you meant, thanks.

We already have (old) wills but needs updating to name dc guardian etc.

Are you saying that death in service benefits aren't liable to IT is we arent married and partner is named in expression of wish? I thoght perhaps it was.

If so, the actual disadvantages I have discovered so far are:

1. IT - if I die and leave assets over £350K or whatever the limit is (excluding property, pension, death in service???) DP would have to pay IT one it (even if goes to the DC?) - is there any way of avoiding this?

and

2. Widows pensions - which you are right, is outrageous considering I could have claimed tax credits for the children on my own when on may leave etc but didn't due to income from DP.

wonderingwondering Mon 27-Jul-09 19:56:45

I am sure death in service benefits, like life insurance, pass directly to the named person, so never fall in to the estate of the deceased person, and so are not liable to Inheritance Tax. Your employer or pension provider should be able to confirm that.

And yes, I understand that when you die, anything over the Inheritance tax threshold (thinking about it, it may be nearer the 400/425k mark now) will be taxed at 40%. You can only pass to your spouse completely free from IT.

If you pass to your spouse, then he passes to your children, they only pay tax above your combined inheritance tax thresholds (so 2 x 425k = 850k).

If the property is held as joint tenants, the legal position is you both own all of the property, so if one dies, the other is left as the sole owner: you don't inherit the other person's share, so that is completely outside of the IT tax calculation, until the house passes to your children, when it will be liable to tax if the estate as a whole is worth more than 850k.

Am sure someone will shout if that is horribly out of date. Don't know about the benefits at all.

jabberwocky Mon 27-Jul-09 20:03:20

yorkiegirl started a thread about this a while back. There were other threads that sprang off of that one as well.

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