Inheritance tax - unmarried, not civil partners

[whatwouldyoudoifisangoutofkey]

I'm not sure I understand the IT implications of our situation.
Living together , have one child.
We're in our 70s , son in 30s living at home.
Mortgage paid off , property in London probably worth about £650.000
I'd need to check if we're tenants in common or joint tenants.
I think the latter.
So one partner dies current will leaves entire estate to remaining .
So remaining has to pay IT on value over £ 325.000.
When second partner dies estate left to son and he has to pay on anything over £ 325.000
Is that correct?
If we change will so that son inherits half of property when first partner dies does that reduce IT due ?

If you get married or enter into a civil partnership you can leave to each other and then your son and no inheritance tax would be paid because you would then have an IHT threshold of £1m for property

Yep. Honestly the easiest thing to do is to spend £200 or whatever at the registry office. It will solve your IHT issue. That's assuming child is shared, and not a child of one spouse from another relationship, as then you would want to put additional protections in place. But marriage means that the IHT allowance of the first spouse to die will pass to the second spouse, so no IHT due if estate is under £1m.

https://www.gov.uk/inheritance-tax/passing-on-home
Iht triggered on the first death (but wouldn’t be if you’re married) of value over £325k

then when the last one of you dies there’ll be 40% tax payable on the value over £500k. So same assets taxed twice. If you were married there would be no iht payable by your son as allowance would have been £1m

there is a really compelling case for marriage or civil partnership here (unless you love paying tax)

If you leave half your home to your child it could be affected by their divorce, death, bankruptcy, gambling addiction .... Think through the possible implications.

To answer your first question: splitting the first inheritance between partner and son would do nothing to minimise tax. The only way to avoid iht would be to get married

Right , thank you.

It's probably worth speaking to an estate planning expert generally, because there's also considerations about the remaining spouse remarrying and cutting their child out of their will, for example, when you have mirror wills and are joint tenants. Unfortunately it can sometimes happen along with early dementia when it's too early to be diagnosed but can be very damaging and deprive a child of their inheritance.

It's worth thinking about it and investigating stuff like a life rent arrangement as tenants in common instead of joint tenants, etc. and making sure your affairs are set up how you want them to be.

Is that true?
If unmarried if A leaves direct to C then the first 325 or whatever will be tax free and then B can also leave 325 to C tax free.
If A leaves everything to B then B leaves to C then anything A leaves above 325 gets taxed twice, once on As death and again on B's.

Ken Dodd was with Annie for 45 years
HMRC beat him twice.
He married Annie 36 hours before he died.
Ken won.

Marriage is the rock solid tax avoidance tool

If you sever the joint tenancy and become tenants in common, you could each leave your half of the house and assets to your Dc.

The IHT threshold is £500k each if it includes leaving your home to direct descendants.

You would both need to leave a life interest to your Dp: the right to live in the house for the rest of their life.

@ClicketyClickPlusOne and@TeenToTwenties thank you .
I've been telling our son that this and the " your tax free threshold can be £500,000 if you leave your account estate to your child" is only true for civil partners and married couples .
But perhaps he's right and I'm wrong.

Yes it's true for everyone.

Just fucking marry or CP

£215 saves all hand wringing !! Why would you not ?

Why so aggressive @AwwmyfuckingGod ?
I'm not hand ringing , just checking that my understanding is correct.

That looks like you don't need to be married for that.
Seems to me it is def more iht efficient to leave to son than to 'non legal partner'.

Which makes sense to me.

Your individual IHT nil rate band (tax free) is the same whether you are married or unmarried.

It is £325k + an extra £175k if you leave your main residence to your descendant as described above.

You can either leave all your assets direct to your descendants, in which case your estate will be liable for IHT on anything over £500k if it is worth more than £500k ( which may be the case now that a pension pot will be included).

If you are married you can leave assets to your spouse (or CP) with no IHT at all due at that point.

Then they inherit your £500k tax free amount to add to theirs if their own will leaves the property to direct descendants, and at that point their estate pays the IHT on anything over a £1m including the assets they inherited from you.

So being married just leaves the IHT to be paid on anything unspent when the surviving spouse dies. It doesn’t protect the value of the estate left to your Dc in the long run.

Plus as a pp said, men especially are very prone to re-marrying quickly , usually to a younger woman and without sorting out the details of a new will. I have seen 3 of my friends watch their mothers share of the marital assets disappear into the hands of a second wife.

You can leave your own assets to your Dc whether married or not.

BUT it only works if the house is owned ‘in common’. You can sever a joint ownership if both agree, you need a solicitor.
And to be sure there is no legal challenge to the will you need to ensure that your spouse or a dependant (which could include a partner) is adequately provided for, I.e can live off their own resources or something left to them.
AND if leaving your share of the house to your Dc, whether married or not, you probably want a ‘life interest’ written into your will which allows them to continue living there even though it has been left to your Dc.

So you can see from all this that yelling ‘just get married’ doesn’t actually answer your needs if you would prefer to leave your assets direct to your Dc. You would still need a solicitor to deal with becoming Tenants in Common and writing specific clauses into your will.

Thank you @ClicketyClickPlusOne . That's kind of you to take them time to write in detail . And very helpful.

Also in a few years pensions become taxable on death to non married surviving partner .
Thanks Labour .