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?

Actually I think it’s a great idea. Most lawyers are not in the mega earning firms and there isn’t as much work as you might imagine. The fall out from this will help feed and clothe their children for several years.

May I suggest that in order to avoid outrageous legal fees, you now each draft your own wills without legal advice?

Are you sure?

haven’t checked this although I know there are ‘real’ requirements to make a wedding ceremony a marriage. In civil cases- can people just turn up on day, sign and go separate ways and it’s legal?

Other advantages might be being able to pass tax allowances between civil partners inheriting ISAs without loss of status and whatever other tax and other benefits there are to being married.

Next of kin" is not a formal legal term I'm the uk. Its more as a voluntary "emergency contact" in healthcare settings. Anyone can nominate anyone as their next of kin, and this role does not grant legal authority to make medical or financial decisions.

What I said! I agree.

also when pp are designing this, do they become different people from the ones we hear from daily when dealing with income tax saying everyone must pay tax otherwise who will find NHS, roads are crap etc. the disconnect is huge!

You put it more succinctly! Agreed! I don’t get it!

Look it up, the whole point of civil partnerships was to make people in a stable relationship, who had reasons they didn't want to marry, have the same legal status as married people. Sorry it's AI:

Civil partnerships in the UK are treated identically to marriage for tax purposes, offering significant advantages, including tax-free asset transfers, no inheritance tax on assets left to a partner, and eligibility for marriage allowance. Key rules include the ability to transfer up to £1,260 of personal allowance to a higher-earning partner, no capital gains tax on gifts between partners, and inheriting ISA tax-exempt status.
Evelyn Partners +5
Key Tax Rules for Civil Partnerships

• Inheritance Tax: Assets, money, and property transferred to a civil partner upon death are exempt from inheritance tax, regardless of value.
• Income Tax & Marriage Allowance: If one partner is a non-taxpayer and the other is a basic rate taxpayer, the non-taxpayer can transfer £1,260 of their personal allowance to their partner.
• Capital Gains Tax (CGT): You can transfer assets (such as property or shares) to your partner on a "no gain/no loss" basis, meaning no CGT is payable at the time of transfer.
• ISA Allowance: If a partner dies, the survivor can inherit the deceased's ISA savings and maintain their tax-efficient status through an "additional permitted subscription".
• Pension Benefits: Surviving civil partners are entitled to the same state pension benefits and private pension rights as married spouses.
• Property/Dividends: Jointly owned property is generally taxed in equal shares. Civil partners can also share dividend income from small companies to optimize tax bands

Also, with respect, you are not talking of millions! Doing legality for £325 benefit or less is not clever.

Again, why not look into gifting and ask them to save it in case you need it later. That’s what I would do if I really want to save on tax. But you don’t sound like you are swimming in cash, so what about your living expenses (and unexpected major expenses) if you start gifting?

Are you saying all married people and civil partners are tax dodgers, and the only proper way to pay taxes is by staying single, with all the other inherent risks that brings in relationships.

This.

Just because people don't like it, it doesn't make it illegal or fraudulent.

There’s a huge difference morally between being married as a couple, living as a couple etc and a side effect of that being the tax benefits and fraudulently entering into a civil partnership when you actually already have a partner purely for tax dodging reasons.

One of the most astounding posts I’ve read on here. Honestly.

Didn’t want to be crude! Marriage needs to be consummated on wedding night etc

from what you said, civil P was people cohabiting (so a couple) who do not want to get married to get same rights as married!

op has a separate DP. She doesn’t live with ExH and will not live with him. So they are not going to be a couple let alone ‘cohabitating’ couple.

yes, I am a lawyer!

good thing OP had already discounted it. It was not even going to be legal. I see someone highlighted this by simply saying lawyers would make lots in fees, but didn’t say why! Although they might be referencing the fraudulent aspect of the whole set up.

If it is entered into purely for tax avoidance reasons then HMRC could absolutely scrutinise it, and that wouldn’t be particularly hard to spot if someone reported it here as OP has a partner, divorced and then essentially re-married the ex.

Honestly, just pay what you owe. It’s not £1,000,000’s here anyway.

I would just gift over your home to DC now with a legal document giving you the right to stay there till your death. Not sure if you have to pay a minimal rent as such or if I’m over simplifying this.

I agree with the 'terribly risky' brigade. The civil partnership would give your ex certain rights, and you don't know how his life will pan out. I think he would certainly inherit something if you predecease him, however the will is worded.

Sorry had a long week and in relaxing mode…. It would have to be a trust. Fees to trust company and managing a trust is not free. And care people may want to have a look later, if she needed care.

as I said, unless op was talking of millions, no point. Even say 800k to 1 million. Otherwise, just gift them money and ask them to save.

trouble with that is if adult children get divorced the money is gone. OP have a glass of wine or whatever you like breathe in and breathe out and let this whole thing go.

It may be changed in the next budget anyway, Reeves will be looking who to sting next.

Amount: my point too.

That too. Politicians have all the powers!

If you are blessed with grandchildren, would you like them to be born in an NHS hospital? Perhaps attend a state school, drive on safe roads? Be treated in hospital if they break a bone? Who should pay for that? Every penny you leave to your family after inheritance tax will be an unearned windfall. And you won’t know about it anyway. For some reason this thread has made me feel utterly miserable.

This absolutely MAD. He’ll be entitled to your assets. Pay your bloody taxes and stop finding ways to hoard money

Not if there was a health LPOA in place with the children &/or her new partner as attorneys.

It didnt take long for "I am not averse to paying taxes, I have paid more than my fair share over the years." to pop up.