Jessica Schock says that as well as romance and love, there are sound fiscal reasons for getting married
‘It is a truth universally acknowledged, that a single man in possession of a good fortune, must be in want of a wife,’ writes Jane Austen in Pride & Prejudice. And I’m sure had Jane been alive today she would have acknowledged the same in reverse. Whether Jane Austen’s opening line of her most acclaimed novel is true or not is a matter for another day. What is true, however, is that it is mid-June, it’s raining – a lot – and wedding season is well underway.
Weddings are really a time to reflect on those things important to us all – health, happiness and loved ones. Let us reflect on how those loved ones can help, because from a tax-planning perspective you will always hear your lawyer or accountant tell you one thing: get married (if you can bear it)!
There are many advantages to a union, romantic or otherwise, but here we set out a few of the more ‘practical’ implications and tips:
1. Transfers between spouses – are mostly tax free. So you can pass assets between each other to take advantage of more beneficial tax rates, e.g. if one spouse/partner is a basic rate taxpayer. You can also take advantage of two sets of annual exemptions for capital gains tax. (One of very few disadvantages, financially that is, is that married couples can claim private residence relief from capital gains tax on only one property, whereas unmarried couples can have separate main residences.)
2. In addition, transfers between spouses are not subject to inheritance tax so you can defer any inheritance tax payments until the death of the second spouse/civil partner.
3. As cynical as it may sound, for the financially less sound individual in the relationship, marriage increases the level of protection on divorce. If you are the more financially sound one in the relationship then consider a pre-nuptial agreement; in terms of bringing that topic up with your fiancé or fiancée they are much less taboo than say ten years ago.
4. Gifts in contemplation of marriage – are not subject to the inheritance tax rules that tax gifts made within the last seven years prior to your death. This is a neat way of encouraging the passing on of wealth with the certainty that there is no tax exposure, although such a gift from each parent is limited to £5,000.
5. Remember that marriage revokes a Will, so if you already have a Will in place, don’t forget to speak to your solicitor about this before you wed! If you are moving on to a second, third or fourth… marriage and have children from your previous marriage there are plenty of options for securing your children’s future under your Will whilst also ensuring that your new partner is well looked after.
For those of you getting married this summer or celebrating the nuptials of a child or loved one, many congratulations and enjoy the day(s); just don’t get carried away and forget all of the extra advantages marriage can bring.
Jessica Schock is an associate at boutique private wealth law firm Maurice Turnor Gardner LLP.