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Rise in unmarried seniors at risk of hefty Inheritance Tax bills

A growing number of over 70s could be at risk of large Inheritance Tax bills due to their lack of marital status.

It comes as research has shown that the number of over 70s choosing to live with their partner rather than marry or enter a civil partnership has surged by 288 per cent over the last 20 years.

Over the years cohabitation has increased in popularity, which is now having an impact on couples being hit with large Inheritance Tax bills and being forced to sell their home.

There has reportedly been an increase in the number of unmarried couples over 65 seeking professional advice, whose homes are subject to Inheritance Tax when one partner dies.

Rachel Blackburn, an Associate with Mander Hadley and expert in Inheritance Tax and Older Client matters, said: “With unmarried partners there is no spouse or civil partnership exemption so inheritance tax could be payable on the home they live in when one party dies either owning all or part of a property”.

“As well as mourning the loss of a loved one, the surviving partner may even have to sell the family home to fund the inheritance tax, leading to further stress at a difficult time”.

What action can cohabiting couples take?

To reduce this problem, cohabiting couples could ensure the home is in common ownership when they purchase it to ensure peace of mind for the future.

It is also a good idea to get professional advice for succession planning so surviving loved ones are not left with added stress and insecurity. If there is likely to be inheritance to pay this can be factored into the succession plans.

Inheritance Tax is something we don’t want to think about, but it is important that you understand your liabilities when the time comes. Couples should talk about their situation, so they understand potential future Inheritance Tax liabilities.

When do you have to pay IHT?

Currently, the threshold to pay Inheritance Tax is £325,000. Therefore, it will not be due if the value of the estate amounts to less than £325,000.

The standard rate for Inheritance Tax is 40 per cent, but this is only applied to the amount above the £325,000 threshold.

Additional Residence Nil Rate Bands are available when leaving property to your children. It is important to note however, that this additional tax-free amount is not available when leaving your property to your unmarried partner.

For advice on Inheritance Tax and related issues, please get in touch with us.