To give you an example, previous clients of Thackray Williams came in to see us on Valentine's Day (funnily enough).
At the time, they had been together for almost 30 years, and on the first of their deaths, because they were not married, there would have been inheritance tax one way of approximately £180,000 and the other way approaching £80,000.
By the couple getting married, which they subsequently did following our advice, there would be no inheritance tax on the first of their deaths and their wills were structured so that anything on the second death over and above their tax allowances would simply be left to charity.
This allowed no tax to arise on both the first and second of their deaths and we managed to avoid several hundred thousand pounds of inheritance tax arising in their estates, thereby increasing the amount they could leave to their beneficiaries on the second of their deaths.
On the aforementioned occasion, the clients had no children. However, we regularly have conversations with clients who have been together for many years, who do have children, and again the situation for those clients is even more stark.
The inheritance tax is payable, both on the first death and then on the second death, and quite often by the survivor’s death those same assets have been taxed for the second time.
From a tax planning point of view, the ideal solution would be for clients to be able to pass assets across tax-free on the first death and effectively buy themselves as much time as possible to then look at other tax planning opportunities, which mainly involve giving assets away or spending their money and enjoying it, while reducing their estates for inheritance tax purposes by the time they get to the second death.
Second marriages and beyond
Quite often we have clients who are getting married for the second, third or fourth time and beyond, with children from previous relationships.
Again, we have a will structure in place that incorporates a life interest trust on the first death, with a huge amount of flexibility.
This enables the survivor to have the use of those assets during their lifetime but also safeguards the capital from the survivor meeting someone else and changing the terms of their will.
It also enables assets on the second death to be split back into the two parties’ separate estates and to pass down to their respective children.
What are your priorities?
All the conversations we have with clients from an inheritance tax point of view are extremely valuable for many clients in terms of their potential tax savings.
However, once you are married or enter a civil partnership, you open up your assets to being divided upon divorce.
