100 years ago it would have been very unusual, and a social taboo, to live together without being married. But in the last 40 years or so it has become more common, and accepted by society, and there are increasing numbers of couples who choose to live together rather than getting married. However, there are some couples who choose to get married after decades together, when they’re middle aged or even later.
So why are people making this decision? There’s a great article you can read HERE which shows some interviews with people who’ve been in this situation. However, to sum it up the simple reason is that it helps to ensure that the surviving partner does not have to pay inheritance tax.
The law states that you only pay inheritance tax if you have assets worth more than £325,000, however with house prices as they currently are, if you own property the likelihood that is that that applies to you. In July 2019 the average house price peaked at £233,000 – the average price in London alone was over £470,000.
The rate of inheritance tax (in 2020) is at 40% for the portion of property over the threshold so clearly having to pay this will add a significant financial burden to the estate – potentially resulting in enforced sale of the property.
However, if you are married, you can pass your property to your spouse on death, free of any inheritance tax. When the second partner passes away, s/he will pay inheritance tax on everything over £650,000 (both nil rate bands).
If I meet a co-habiting couple who would be liable for inheritance tax, I will always explain this benefit of marriage. I will calculate the amount payable on the estate at the time, and compare it to the cost of a wedding! (but sadly I have never had to buy a hat for the occasion).
If you would like more information about this please contact me HERE