Ask the Expert: My partner proposed for financial reasons, what are they?
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My partner and I have been together for about 35 years and we have two adult children.
This Valentine’s Day he surprised me by asking me to marry him! It seems the very unromantic reason for asking me now was that he believes there are financial benefits to being married. Is this the case?
Carl Lamb of Smith & Pinching responds:
There are a few financial advantages in being married or in a civil partnership rather than co-habiting.
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The first area where marriage might benefit you as a couple is in the way that you pass your assets on when you die. Depending on the size of your estate and how you plan to bequeath your home and other assets on your death, you may find that you have a higher combined Inheritance Tax (IHT) liability if you die without being married.
This is because there are IHT exemptions that can be passed to a surviving spouse or civil partner if unused, but not to a co-habiting partner. IHT is a complex area with additional rules for larger estates, so do get advice in planning for this.
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If you transfer assets between you during your lifetimes, there may be IHT or Capital Gains Tax implications if you are not married but transfers between spouses are exempt from both.
A co-habiting partner has no rights to inherit under intestacy rules (although any assets owned jointly as joint tenants would automatically pass to the survivor).
Another key area where being married may benefit could be your pensions, although this is not always the case. Some pensions may only provide a surviving partner with benefits after your death if you are married or in a civil partnership.
If you have ISA savings, there is a specific provision that allows a spouse or civil partner to inherit an additional one-off allocation of ISA allowance equivalent to the value of the deceased partner’s ISAs. There are rules and time limits for this, so it would be important to get advice at the time.
There are other tax breaks available to you that may apply if you are married. These include the Marriage Allowance, which allows you to transfer 10 per cent of one spouse’s personal tax allowance to the other if one of you is a non-taxpayer and the other is a basic rate taxpayer.
Finally, marriage may give you some security if you and your partner were to separate. Unmarried partners generally have limited rights to assets held in their partner’s name.
References to taxation are based on our understanding of current legislation and HMRC practice, both of which may change. Tax treatment depends on individual circumstances and may change if circumstances change. Any opinions expressed do not constitute advice. The value of your investment can go down as well as up and you may get back less than the amount invested. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.