Alexandra Hawkes, Trainee Solicitor, and Nicole Miller, Legal Director, provide insight into some of the effects of marriage on your Will and Tax planning.
Marriage is a significant milestone in life, and a legally binding contract that requires careful thought and consideration. One of the most overlooked benefits of getting married is its impact on your Will and Inheritance Tax (IHT) position. If you are in a long-term relationship and yet to tie the knot, you might be surprised at the protections and tax efficiencies that come with marriage.
Maintaining a valid Will – avoiding intestacy
It is important to note that if you have an existing Will, unless it was made in contemplation of your upcoming marriage or civil partnership, it is automatically revoked upon tying the knot. This means that if you do not update or make a new Will, you could unintentionally leave your Estate in disarray, which can cost your Estate thousands and your family much time and distress.
By using solicitors to ensure that your Will is properly drafted, you can protect your spouse and loved ones while making the most of the legal benefits that marriage provides.
Note that unlike a marriage, a divorce or dissolution does not automatically revoke a Will, however ex-spouses will be treated as though they have predeceased you.
How Marriage Affects Your Will
1. Automatic Inheritance Under Intestacy Rules
A common misconception is that unmarried partners automatically inherit from each other, as a ‘common law spouse’. However, under English law, this is not the case – see our article on cohabitee’s rights here. If you pass away without a valid Will (intestate), your Estate will be distributed according to the statutory rules of intestacy, which prioritise spouses, children, parents, and so on through various close relatives – but not unmarried partners.
Marriage provides crucial protections. A legally married spouse is the first category of individual entitled to inherit under intestacy rules, which can provide your partner with greater financial security.
However, if you are remarrying it is vital that you have a valid Will drawn up. Under the rules of intestacy the first £322,000 of your Estate will pass to your spouse (along with any personal chattels), and the remainder of your Estate will be divided as to 50% to your spouse and 50% to your children equally. Therefore, if you have children from a previous relationship there is a risk that they will be disinherited and/or greatly financially disadvantaged, depending on the size of your estate. If your Estate is worth up to £322,000 your spouse or civil partner is entitled to the entire Estate under intestacy.
By preparing a Will, you can ensure that your new spouse is provided for, whilst also safeguarding the capital of your Estate for your children. The rules of intestacy do not offer this flexibility.
To avoid having a period where you are newly married and, in the whirlwind of excitement, have not got around to sorting your Will (or are just too busy trudging through the admin of updating your passport, driving licence etc etc!) – and therefore being temporarily intestate and potentially leaving nothing to your intended beneficiaries – you are able to draft a Will in contemplation of your upcoming marriage to avoid the automatic revocation of your existing Will (see above).
Our team are able to help you to draft a Will in contemplation of your upcoming marriage – if you’re getting married this summer don’t hesitate to get in contact today.
2. Inheritance Tax Advantages of Marriage
Inheritance Tax (IHT) is often a concern for individuals who have built up wealth over their lifetime. One of the most beneficial aspects of marriage from an IHT perspective is the spousal exemption – no IHT is payable on assets left to a spouse. This allows you to pass your assets to your spouse entirely tax-free, regardless of the amount, provided that both partners are domiciled in the UK.
For assets that are left to non-exempt beneficiaries, the IHT Nil-Rate Band will apply. This is the amount of your Estate that can be gifted tax free to non-exempt beneficiaries. It is currently £325,000 per person, with anything above that taxed at 40% (unless at least 10% of the Estate is gifted to charity, in which case the rate of tax applied to your non-exempt Estate falls to 36%). It should be noted that any lifetime gifts made in the seven years prior to your death may reduce the available Nil Rate Band.
However, this means that if you have an Estate larger than this and are leaving assets to an unmarried partner, your Estate could face a significant IHT bill.
Moreover, when the second spouse passes away, any unused portion of their late spouse’s Nil-Rate Band can be transferred, effectively providing the potential to double the tax-free threshold to £650,000 (when the whole of the first Estate is left to the surviving spouse). With the additional Residence Nil-Rate Band for qualifying Estates, a married couple could potentially pass on up to £1 million to their beneficiaries tax-free.
3. Pension and Death Benefits
Often married parties are automatically entitled to a spouse’s pension benefits or death-in-service payouts, but some pension schemes do not offer the same protections for cohabiting partners.
4. Rights to Occupy the Family Home
If your home is only in one partner’s name, a surviving spouse may still have rights to occupy the property, depending on intestacy rules or the terms of the Will, where an unmarried partner has no automatic right to stay. They may need to make a legal claim to retain the property, which can be costly and uncertain.
Planning Ahead: The Importance of Proper Advice
While marriage brings considerable Estate planning benefits, simply getting married is not enough to ensure your wealth is protected in the way you intend. A properly drafted Will ensures that your assets are distributed according to your wishes. Additionally, tax-efficient Estate planning, such as making use of lifetime gifts, Trusts, and allowances, can further reduce potential IHT liabilities.
If you are in a long-term relationship and considering marriage, or if you are already married and want to ensure your Estate is structured as efficiently as possible, seeking professional advice is essential.
At Herrington Carmichael, our expert Private Wealth and Inheritance team can help you understand your options and put the right plans in place to safeguard your future. Contact us today to discuss how marriage could benefit your Estate planning and Inheritance Tax position.
