Suggest to ExH we enter into a civil partnership to avoid DCs paying IHT

[TemporaryDogMum]

I am looking at this from a purely financial viewpoint, not a relationship/romantic point of view, hence posting in Money Matters.

I got divorced around 15 years ago and am now in a happy and established long term relationship with someone else. I have no plans to marry my current partner and he does not want this either. I have two adult children with ExH who no longer live at home.

I own my own home which is worth around £500K and have a SIPP for retirement plus another £100K or so in savings/investments. I am self employed and hoping to retire in around 8 years time and will drawdown from my SIPP. Current DP is independently wealthy so my will leaves my entire estate to my 2 DC.

As a single person I know I have £325K standard inheritance tax allowance plus a further £175K of main residence allowance. In the next few years it is likely my property value alone will take me over that allowance and my pension will likely be brought into the scope of IHT in 2027.

My ExH is living in rented accommodation and is retired on a modest private pension plus state pension. Both his parents are deceased so he is unlikely to inherit anything at this point. We are on civil although not really friendly terms. He may have some pension to leave the children but I suspect will be well within his £325K inheritance tax band.

It has been suggested to me that in order to reduce the Inheritance Tax bill my DC may be liable for in the future I should enter into a civil partnership with ExH in order to add his unused IHT allowance to mine. He is older than me by 10 years so likely to pre-decease me (although obviously this isn't guaranteed). We would obviously not actually live together - I'm not sure if that matters?

He has left everything in his will to our joint DC and lives a very solitary lifestyle so I think it is unlikely he will remarry. Our 2 DC are his whole world so I am confident he would put their needs first with any financial decisions.

Thoughts on the practical pros and cons of suggesting a civil partnership with Ex H?

Wouldn't that be criminally fraudulent? You'd be committing to a legal process as a tax dodge.

He would then be your next of kin. Should you need medical decisions made eg if you were in a coma, would you want him to have that power? Or your current partner?

I am in a similar situation.

i have looked at methods of tax planning.

you could well live a lot more years yet, so could your ExH. You do not know what the years will bring - he may remarry. Your partner might die and you might remarry.

this is a very big step for something that may happen a long long time in the future.

Also, if you do go ahead and for whatever reason your ex decides later down the line he wants it annulled, wouldn't he then be liable for half of your assets under the terms of a civil partnership? Legally it's just like getting a divorce.

You are crazy.
Anything could happen between now & your kids inheriting. Not least your money going to him then him falling out with one of the kids & disinheriting them or meeting someone and marrying them making his previous will invalid.
No way should you be doing this.

Speaking as someone who only got married to make death easier this is an awful idea.

what if you or your ex do want to marry again? He will be entitled to half of your worth.

he will become your next of kin so will make medical decisions for you.

your children may be in the privileged position that your estate may need to pay some tax. You won’t know about it and it’s not their money until everything is paid.

Why does everyone complain about the services we receive, while simultaneously attempting to avoid paying for them?

There's tax planning and then there's deception and fraud.

Er, but then he could divorce you and you'd potentially be wrangling over assets.
You have two children, who are already adults, and a nice sized estate that means they'd both be able to have nice chunky house deposits if they haven't already bought by that time. Its insanity to make yourself vulnerable in this way for the sake of a few quid your kids dont NEED.

He could need a care home, and your assets would be considered in the pot to pay for it. He’d be massively disadvantaged if he needs any benefit type support.

Just say ‘I’m prepared to commit fraud to avoid paying tax out of my unearned wealth’ and make sure you never complain about how shit the country is afterwards (whether that’s the NHS or potholes). Have a good day.

👏👏👏👏

Quite apart from the practical aspects, as outlined above, what about the emotional effect. How would you feel if your partner did this!? How will the DC feel?

I would have thought that it would be more useful to your DC to find ways to pass money over now/soon rather than in 20 to 30 years' time.

The things people will do to avoid paying their taxes 🤣

Being next of kin does not make him or anyone able to make medical decisions for you! Ignore people suggesting that.

This deception might work but all I can think is that is what everyone will talk about at my wake, how I had so much money that I essentially partnered up with my ex to avoid paying what was due to the state. I know I’d be dead but I still wouldn’t want that.

Apart from the potential fraud aspect I don’t think this would work unless you left all your assets to each other rather than DC.

Absolute madness for the reasons stated above - he could divorce you and be entitled to your assets, get remarried, disinherit one or both your kids etc.

Wouldn't the much simpler option be to sign over your house to your kids now?

Just when you think you've read the stupidest of things, things get even more stupid.
This has to be one of the daftest, not to mention illegal [?] things I've ever read on MN.

He might well spend all the money before your children inherit (assuming you die first)

He might remarry and then if he dies she’ll get all your money (assuming you die first)

Most people don’t have pensions that can be given to children but if you do it’s only the inspect remainder. Most people are living to 80+, many in nursing homes at £1400 a week. So there may well be not much pension left.

what about your current partner? I would definitely leave you if you did this !

Just resign yourself to the fact that inheritance taxes are unavoidable and enjoy your money while you are still alive

Hear hear.

This absolutely bonkers. Would you remarry your ex? I presume not, because you dont want those legal and financial ties. So why do you think a civil partnership would be 'better', when you'd be creating those legal & financial ties just under a different badge.

Your critical thinking has gone seriously awry here.

Not a bad idea if you can afford. The annual exemptions are derisory but should be used. More useful is the regular gifts out of income route as long as they don’t affect your life style etc and can be for much larger amounts. Also a good option as is hoping you live seven years after gifting and even if you only live less than 7 but more than 4(?) you pay a reduced rate. Also it’s likely your house will increase in value so you are almost certainly going to be caught.
The various practical objections explained are all valid which rules out your civil partnership route. It’s ridiculous that you have to consider such stuff with such low wealth gained from your hard work over your lifetime. Also bringing SIPPs into inheritance tax is a retrospective tax as much planning was around it being outside the scope. It would be fair enough if it only applied to future contributions and/or growth but this government is determined to punish hard work and responsible decisions.

After a few years he could divorce you and get half the house. Or when you die first take the house and live in it. Especially if he meets someone else. Or need care and not get any as he has a house. Or lose any benefits he’s entitled to. Not that there will be any money to pay for these things with all the tax dodging going on.

Still on here OP?

OP maybe change the thread title to "Should I commit fraud to evade tax?"

Cos that's what you're suggesting.

No reason many young people think your generation selfishly want to leave the country in the shitter.