To think inheritance tax policies need reviewing

EmmaAgain22 · 04/12/2022 01:16

ignoring my views on IHT generally

suppose I buy a place with my sister or friend

are you happy for there to be no IHT if one of us dies?

aside - I think marriage is a legal contract and seeing it that way has nothing to do with feminism. I would not marry because I don't want anyone else having legal access to my money.

TheaBrandt · 04/12/2022 01:31

Why is it a feminist issue? Unmarried men get taxed too. Frankly pretty much every unmarried couple I come across professionally with a larger estate quietly get a civil partnership. There’s no way to replicate that tax advantage if your main asset is your house.

Testina · 04/12/2022 01:32

“I can’t help but think this is an issue of discrimination against unmarried women”

Is it not just discrimination against people who make foolish decisions?

runningupfeesspeakinglegalese · 04/12/2022 01:35

@Passthecheeseboard If you want to pass your assets to your partner without your death estate incurring any IHT, you need to marry/civil partner them first. I think this is pretty widespread knowledge.

I don't see how this is discrimination against unmarried woman.

You have a choice: keep your finances separate and don't have special tax breaks on inter-spousal transfers, or get hitched, link your finances and benefit from no lifetime capital gains and no death taxes. It depends on what is more important to you.

If your partner doesn't want to marry you, again, you have a choice. Either you accept those increased taxes (assuming, of course, your partner even leaves you anything) or you leave and start a relationship with someone who is prepared to marry you.

Frankly, if you want to make IHT more fair, you wouldn't exempt assets passing to unmarried partners - you'd take away the spousal exemption full stop and increase the nil rate band. I think it's been £325k for over a decade now, and is the same up and down the country - ridiculous when you consider the difference in prices between, say, Darlington and London.

The residential nil rate band of £175k only benefits direct descendants and spouses/civil partners, so doesn't do a thing for people who aren't married and don't have kids of their own.

I know some elderly women who like @EmmaAgain22 suggests have chosen to live together with their sisters. When one sister dies, the other is going to have a massive IHT bill. I imagine the shock of selling up and being on their own is going to see the remaining sister off quickly.

It's a tax on people with non-conventional set ups.

Testina · 04/12/2022 01:37

From a general policy point of view, I don’t think people should acquire legal financial responsibilities to another adult without explicitly entering into a contract to do so.

So therefore, marriage and civil partnership are desirable pre-requisites.

If a couple want to avoid IHT without getting married, then they can own the home as Joint Tenants. If a woman (as you’re focusing on them) knows that her boyfriend won’t marry her or allow her to be Joint Tenants, then she needs to make other provision for her financial security.

JamMakingWannaBe · 04/12/2022 01:39

Inheritance Tax starts at £325,000 and it is the value of the Estate over this that is taxed at 40%.

If your home (in equal shares) is worth under £650,000 you don't need to worry. If your home is worth more than this, it's good financial planning to have some kind of Life Assurance to help pay the Tax.

If an unmarried woman dies, the surviving man faces the same issues. Its not discrimination against women.

Testina · 04/12/2022 01:43

Testina · 04/12/2022 01:37

From a general policy point of view, I don’t think people should acquire legal financial responsibilities to another adult without explicitly entering into a contract to do so.

So therefore, marriage and civil partnership are desirable pre-requisites.

If a couple want to avoid IHT without getting married, then they can own the home as Joint Tenants. If a woman (as you’re focusing on them) knows that her boyfriend won’t marry her or allow her to be Joint Tenants, then she needs to make other provision for her financial security.

I just realised I made that sound as if you don’t pay IHT if you are the surviving Joint Tenant. You do, but only half the value of the house is counted towards the estate of the deceased. So for plenty of people, that’s enough to avoid it.

Original poster

Passthecheeseboard · 04/12/2022 01:51

runningupfeesspeakinglegalese · 04/12/2022 01:35

@Passthecheeseboard If you want to pass your assets to your partner without your death estate incurring any IHT, you need to marry/civil partner them first. I think this is pretty widespread knowledge.

I don't see how this is discrimination against unmarried woman.

You have a choice: keep your finances separate and don't have special tax breaks on inter-spousal transfers, or get hitched, link your finances and benefit from no lifetime capital gains and no death taxes. It depends on what is more important to you.

If your partner doesn't want to marry you, again, you have a choice. Either you accept those increased taxes (assuming, of course, your partner even leaves you anything) or you leave and start a relationship with someone who is prepared to marry you.

Frankly, if you want to make IHT more fair, you wouldn't exempt assets passing to unmarried partners - you'd take away the spousal exemption full stop and increase the nil rate band. I think it's been £325k for over a decade now, and is the same up and down the country - ridiculous when you consider the difference in prices between, say, Darlington and London.

The residential nil rate band of £175k only benefits direct descendants and spouses/civil partners, so doesn't do a thing for people who aren't married and don't have kids of their own.

I know some elderly women who like @EmmaAgain22 suggests have chosen to live together with their sisters. When one sister dies, the other is going to have a massive IHT bill. I imagine the shock of selling up and being on their own is going to see the remaining sister off quickly.

It's a tax on people with non-conventional set ups.

yes I hadn’t even thought about relatives who choose to live together, and pay for a property together… Just looked into this and that seems really unfair too. Even more unfair really considering they don’t even have the option of civil partnership (which is essentially a legal agreement but unlike marriage doesn’t require a sexual relationship). One of my friends actually lives with her sister, so this isn’t something uncommon or unheard of🤷🏼‍♀️

Just came across this story of 2 sisters:

www.bbc.co.uk/news/uk-45732851

OP posts:

ittakes2 · 04/12/2022 02:06

you have not considered adult children living with a parent who dies - they would also have to sell their home due to tax. I think inheritance tax is awful - tax was already paid on the money used to purchase the house.

EmmaAgain22 · 04/12/2022 02:08

Of course it's not unheard of.

I have pondered and I really can't see your argument full stop, nor can I see how you connect it to feminism.

if people want the legal protection afforded by marriage, they need to get married. If we automatically apply those rights to couples living together, that's a lot of people who won't be able to live together because it then legally muddies the waters in a way they don't want.

this is all separate to IHT, which isn't generally fair full stop IMHO as I should be able to leave my money to whoever I choose, and meanwhile the international companies get out of paying tax at all.

EmmaAgain22 · 04/12/2022 02:11

ittakes2 · 04/12/2022 02:06

you have not considered adult children living with a parent who dies - they would also have to sell their home due to tax. I think inheritance tax is awful - tax was already paid on the money used to purchase the house.

I know a few people in this situation and I think if the house is joint names, or some such, then they can get out of paying the tax? Not 100% sure.

MintJulia · 04/12/2022 02:13

There was a famous case a few years ago about two sisters who had lived in their house, inherited jointly from their parents for more than 80 years. They were both in their 80s and one faced losing her home if the other died. They took the issue to court and lost.

https://www.theguardian.com/money/2006/dec/13/inheritancetax.business

But it would equally affect brothers.

EmmaAgain22 · 04/12/2022 02:17

OP "So this is inspired by another thread I read tonight, which highlighted the issues of women needing to be married to have their rights protected in a financial way. At first the feminist in me was angry at the suggestion. I believe in my heart you should marry for love not financial reasons. And that a woman shouldn’t have to rely on a man for finances anymore in this way (it’s not the 1950’s anymore ya know 🙄)…"

actually, this whole premise is based on emotion, not logic. Women do not need their rights protected. Individuals of either sex may or may not benefit from the legal changes involved in marriage. We are all adults who can choose accordingly.

this kind of view - "women need more protection" simply infantilises women.

i do think legal and financial basics should be covered in school. If people really are ill informed about the meaning of marriage, then perhaps it's time to ensure you have to sign a contract with a solicitor who will talk you through it, as part of the marriage.

EmmaAgain22 · 04/12/2022 02:20

*I mean, we don't need rights more protected in terms of marriage vs not marriage.

runningupfeesspeakinglegalese · 04/12/2022 02:22

EmmaAgain22 · 04/12/2022 02:17

OP "So this is inspired by another thread I read tonight, which highlighted the issues of women needing to be married to have their rights protected in a financial way. At first the feminist in me was angry at the suggestion. I believe in my heart you should marry for love not financial reasons. And that a woman shouldn’t have to rely on a man for finances anymore in this way (it’s not the 1950’s anymore ya know 🙄)…"

actually, this whole premise is based on emotion, not logic. Women do not need their rights protected. Individuals of either sex may or may not benefit from the legal changes involved in marriage. We are all adults who can choose accordingly.

this kind of view - "women need more protection" simply infantilises women.

i do think legal and financial basics should be covered in school. If people really are ill informed about the meaning of marriage, then perhaps it's time to ensure you have to sign a contract with a solicitor who will talk you through it, as part of the marriage.

Yes. So many people (especially women) want to get married because "it's romantic." It's a legal contract, not a bunch of bloody flowers.

There's something very wrong about the legal aspects of marriage vs not getting married not being taught.

I'm not saying everyone should or shouldn't get married. But they should have their eyes wide open and understand their choice.

runningupfeesspeakinglegalese · 04/12/2022 02:23

MintJulia · 04/12/2022 02:13

There was a famous case a few years ago about two sisters who had lived in their house, inherited jointly from their parents for more than 80 years. They were both in their 80s and one faced losing her home if the other died. They took the issue to court and lost.

https://www.theguardian.com/money/2006/dec/13/inheritancetax.business

But it would equally affect brothers.

Yes, I remember this one.

It could affect brothers. But in real life, I've only ever heard of unmarried sisters living together in their old age.

runningupfeesspeakinglegalese · 04/12/2022 02:27

EmmaAgain22 · 04/12/2022 02:11

I know a few people in this situation and I think if the house is joint names, or some such, then they can get out of paying the tax? Not 100% sure.

Show quote history

If a house is owned as joint tenants, then the other half automatically passes to the other co-owner. That doesn't mean it passes tax free, just that it passes.

Part of your death estate is exempted from death taxes if it's below a certain limit. That limit is increased where property is passing to a child. Plus, if the parent was previously married and their spouse died first, any remaining exemption is carried forward, further increasing the limit above which death tax is payable.

I suspect that's what you're thinking of.

JustLyra · 04/12/2022 02:47

I can’t help but think this is an issue of discrimination against unmarried women

Marriage is a legal contract that offers certain protections. People have the choice and when they choose not to make a legal choice (marriage or CP) then things like IHT, bereavement benefits, marriage tax allowance etc don’t apply, as well as the other party having no claims if you split up.

If people want to choose to cohabit and keep a legal clear line with no marriage or CP then that’s up to them.

Rather than complaining about discrimination what should be done is that kids need to be taught the legal differences and protections, or lack thereof, between marriage and cohabiting.

SuperCamp · 04/12/2022 08:21

Women (and men) who are not married would do best (IMO) to own as tenants in common and leave their assets direct to their children, as there is an additional £175k added to the allowance if you leave your house (or share of it) to your children.

OP, the reason that many women actively choose to not marry is that they own more equity or have greater savings or pension than their partner, so are protecting their assets against divorce. It isn’t always ‘oh poor helpless unmarried woman’

And if you leave your estate directly to your kids, with a potential IHT-allowance of up to £500k, and your DP / their father does the same, in the end it is the same result for them as their eventual inheritance when he dies and passes it all to them with the accumulated amount he would have had if he inherited the lot.

And In this scenario you avoid him marrying someone younger after your death, leaving the whole of his estate (including what was yours) to her…and she spends it all after he dies, or leaves it to her own kids, and yours see nothing. This has happened to two of my close friends.

SuperCamp · 04/12/2022 08:23

P.S and in the above scenario, whilst leaving your £500k worth of assets to your kids you can protect your DP from homelessness by leaving them a life interest in living in the house.

123woop · 04/12/2022 08:28

I agree OP. I disagree with most inheritance tax anyway - it's just a way of double taxing people!
I'm very against marriage for lots of reasons and I find the whole idea that we should force people into it to avoid tax and have it as a "financial incentive" etc to be grotesque. No wonder so many marriages end in (expensive!) divorces 🤣

ChristmasJoysuckers · 04/12/2022 08:30

When both partners don't want to marry, fine.
But when one does, why do they stay with a man who doesn't want to marry them?

Iamthewombat · 04/12/2022 08:53

this is all separate to IHT, which isn't generally fair full stop IMHO as I should be able to leave my money to whoever I choose, and meanwhile the international companies get out of paying tax at all.

Which ‘international companies’ are subject to IHT? I think you mean corporation tax, which is a very different matter. And very few groups operating in the U.K. pay no corporation tax at all, contrary to popular belief.

I agree OP. I disagree with most inheritance tax anyway - it's just a way of double taxing people!

In fact, IHT is a mechanism for wealth redistribution. I’m entirely in favour of it. My estate will pay IHT when I die. I won’t care who inherits what, because I’ll be dead. I don’t buy the “worked hard all my life, now I’ll be taxed again, it’s not fair” arguments. It’s a very effective wealth tax that amongst other things funds other people who have ‘worked hard all their life’ but need state help. Nobody has a divine right to inherit a load of assets tax-free.

Ironically the papers read by older people, I’m thinking particularly of the Express, often campaign against what they call ‘this iniquitous tax’, rabble rousing despite the facts that (1) most of their readers will never pay it and (2) most of their readers will be in receipt of the state pension, with a proportion receiving other state benefits, all of which are funded by…you guessed it…taxes.

maeveiscurious · 04/12/2022 09:02

There is a perfectly good legal contract to address this

Wishawisha · 04/12/2022 09:11

See I kind of see it the opposite way as a good selling point of marriage including to feminists (I would say I am one).

I’m afraid I never looked at marriage as a deeply romantic endeavour. DH and I were romantically committed to each other before we got married, that wasn’t a question, but the marriage itself we viewed as a legal document that offered us both protections.

And that a woman shouldn’t have to rely on a man for finances anymore in this way (it’s not the 1950’s anymore ya know 🙄)…

I also have an issue with this. I currently do rely on DH financially and for a considerable period before that he relied on me financially. It was and is the essence of a partnership and is how we are stronger together than apart. Very, very few couples don’t rely on each other financially - there aren’t many people that could comfortably pay their mortgage and keep up their family’s lifestyle without the other one - hence why properties are often sold in case of divorce. Even if one is a SAHP - it is them providing free childcare that the other parent would struggle to afford as well as big mortgage, general costs as a single parent. Relying on each other was a big step and not something I took likely hence various protections including marriage and insurance products.