Unmarried Couple Property Trust in Stamford: Protecting Your Assets and Minimising Inheritance Tax
Unmarried couples in Stamford often face challenges with inheritance tax that married couples don’t, primarily because they don’t benefit from spousal exemption or transferable nil-rate bands. This can lead to significant tax burdens when assets pass between partners.
To illustrate this, consider two examples:
Scenario:
Tony and Jane are an unmarried couple, with no joint children. Tony has a child from a previous relationship. They have Mirror Wills, leaving everything to each other, and upon both of their deaths, Tony’s child will inherit the estate.
Both Tony and Jane have assets worth £300,000 each in their individual names. When Tony dies, Jane inherits his assets. However, because they aren’t married, Tony’s assets can’t pass to Jane tax-free, even though they are both within the individual £325,000 nil-rate band for inheritance tax. When Jane dies, her estate now totals £600,000, which includes Tony’s assets. Her £325,000 nil-rate band covers only a portion of the estate, leaving £275,000 that will be taxed at 40%, resulting in a tax of £110,000.
What if Tony and Jane were married?
If they were married, the estate would pass tax-free between them, and Jane could inherit Tony’s unused nil-rate band, saving £110,000 in tax. This transfer of tax-free allowances would allow Tony’s son to inherit the £600,000 estate tax-free.
Solution:
For unmarried couples, a Property Trust can provide an alternative. If Tony had left his estate to a discretionary nil-rate band trust, his assets would not be combined with Jane’s. When Jane dies, her own nil-rate band would cover the £300,000 estate, and no inheritance tax would be due. Jane could benefit from the trust for the rest of her lifetime, ensuring that their assets are protected and taxes minimized.
If you are in a similar situation in Stamford, our team at Town & Country Law can guide you through the best options to protect your estate and reduce the risk of unnecessary tax burdens.
