If I own a house with DP mortgaged and one of us dies what happens ??

[eyesandearsandamouth]

We have mirror wills giving each other everything and life insurance to pay off the mortgage, no other assets, but the mortgage is massive. But would there be an inheritance tax as we aren't married? We have two children, joint accounts.

The article linked to is about spouses, not cohabitees. I was told by my IFA that it forms part of the estate, despite being joint tenants, for unmarried couples.

OP should consult a professional, rather than randoms off the internet. And not an insurance seller or mortgage advisor either.

This was one of the reasons we snuck off to the registry office with a couple of very discreet friends. That, and a couple of other financial matters where it was much more advantageous to be a legal spouse. We made back the cost of the wedding (around £150 including giving notice, bus fare, and standing the witnesses food & drink) within about 5 years and even timed all the appointments so we didn't have to take any time off work.
Obviously I don't look forward to not paying IHT but it is one less hassle to worry about when the survivor will be already very distressed.

Yes you would be liable to inheritance tax as unmarried on any assets over £325,000 Life insurance can be placed in trust (so would then be exempt from inheritance tax). If your Wills have life interested trusts In them this also causes Inheritance tax issues for unmarried couples. I’m sure this is a area that many people overlook.

Just get married.

However I dont want to be married, never have done.

I obviously don't know your reasons but a civil partnership confers the same financial/legal benefits as marriage. Would you consider that for those reasons?

I'm afraid this is wrong. In a joint tenancy where the tenants are not married or in a civil partnership, 50% of the value of the property is added to the value of the deceased's estate (assuming there are two joint tenants) even though the property passes automatically to the surviving joint tenant.

@Itshothothot is also wrong about the threshold being raised to £1M. That only applies where a married couple or a couple in a civil partnership leave a residential property to their children or grandchildren.

@eyesandearsandamouth Depending on the value of the property, there may be inheritance tax to pay if one of you dies. You need to get proper advice. However, if you marry or enter a civil partnership, there will be no inheritance tax to pay on anything left to the survivor if one of you dies.

Wow I'm Shocked Sorry!

What's the point of a joint tenancy for an unmarried couple then if it's still treated as tenants in common?

www.which.co.uk/money/insurance/life-insurance/how-to-write-life-insurance-in-trust-a1pdy5r28lwf

Seek legal advice and make sure the life insurance is written into trust, accurately.

@prh47bridge So does that mean that if the property they own is worth less than 650k (2x 325k), assuming no other significant assets, there wouldn't be inheritance tax to pay? (I know they're likely to have other assets but for ease let's say they just have the house.)

My partner has always insisted this is the case and as far as I could work out it is, but as house prices go up it's going to start affecting more and more people.

Your understanding is correct. Also yes with house price increases more people will be caught out by this.

If they are unmarried and not in a civil partnership, there will be no IHT when the first partner dies. However, unlike married couples, they can't pass on their IHT allowance. Assuming the first partner to die leaves the property to the second, there will be IHT to pay when the second partner dies as they are now the sole owner of an asset worth £650k. If the second partner leaves the property to their children or grandchildren, there will be less IHT to pay as the allowance will be £500k rather than £325k.

Thank you for explaining that so clearly. So once our assets go above 500k our son will have to pay IHT when we die, unless we get civilly partnered. Good to know for sure! I'll be arranging legal advice when we get closer to that point.

@titchy

Because being unmarried is the key with regard to IHT. Two people who are not married are treated differently to married couples. Fair enough really and their decision. They should get all the facts though before decisions are made. As we have got older, all our unmarried friends have got married! They are doing it for tax reasons and making sure their DC get as much as possible.

You can either sirens hundreds/thousands in solicitor fees in trying to protect yourself/ each other (and may not still be able to fully do it) or just pop to the registry office and get married 🤷

Spend...

Oh for an edit button!
I don't know how they managed to do so many bad changes/screw things up in the update and still haven't given us the ability to correct errors.

It's not just about the money.

I personally don't agree with marriage. It's steeped in misogyny. However being married does 'insure' you against a lot of things in case of death or divorce. I assume a civil partnership does too. No agreements, wills or insurance can do the same.

In case of death, it helps simplify and speed things up too. Gains you rapid access to everything. Means bills are easier to sort. Less paperwork and stress. No issue having access to accounts etc. No waiting for months for money.

Plus the whole tax thing. Could you pay an inheritance tax bill?

But yes. If you have kids, jointly own assets, have other assets like life insurance and pension and aren't married/civil partnership. You need proper advice. By all means choose not to legalise your relationship. But educate yourself on the implications of that choice.