Every couple thinks about how their estate will be split should one of them die. Some couples decide to name their partner as the sole beneficiary of their estate, which can have a positive effect on the partner’s ability to inherit from the deceased spouse. If your partner is only going to inherit from you if you die first, however, you might want not to designate them as a beneficiary. This article breaks down what the inheritance tax threshold for married couples in the UK may mean for your future!
What is the inheritance tax threshold?
The inheritance tax threshold is the maximum amount that you can inherit without paying taxes on the full value of the inheritance. The threshold is currently set at £325,000 per person, which means that if you are the sole beneficiary of an estate worth over this amount, you will not have to pay any inheritance tax on the entire value of the estate. This threshold is automatically increased by inflation each year, and as of 2019, it stands at £ Million.
If you are married or in a civil partnership, your partner may be able to claim a share of the inheritance tax threshold, which would mean that they would not have to pay any Inheritance Tax on any portion of the estate. This depends on how much your partner was entitled to receive as a result of the relationship, and it is important to speak to a financial advisor before making any decisions about your inheritance.
The Inheritance Tax Threshold and Married Couples
It’s important to keep in mind that you are only required to include your spouse in the inheritance tax threshold if you are both UK tax residents. If one of you is not a UK tax resident, then only the non-resident partner is entitled to receive any inheritance tax relief.
There are a few things to keep in mind when it comes to inheritance tax thresholds:
- The Inheritance Tax Threshold for individuals is £325,000, but this can be reduced by £125,000 for each qualifying child who is not a full-time student. This means that a couple with two children would only have to pay £175,000 Inheritance Tax on their estate, as opposed to the full amount of £325,000.
- If only one spouse is a UK tax resident and that spouse inherits an estate worth more than the Inheritance Tax threshold, that individual will be taxed at 40% on the excess value of their estate.
Should Your Partner Be Included in Your Estate Plan
If you are married, both of you should consider whether your partner should be included in your estate plan. If your partner is dependent, he or she may qualify for a financial exemption from the estate tax if you die before you do. The exemption is currently $5 million per individual and can increase in future years.
If your partner is not a dependent, he or she may be able to benefit from estate planning if you die. Your spouse may be able to inherit assets that would have been protected by your estate plan without having to pay any taxes. If your spouse does not have any assets or income, he or she may be able to receive a share of the estate based on how much money you had saved or earned during your marriage.
Discussing estate planning with your partner is an important step in ensuring that everyone will be able to benefit from your death.
Tips for Inheriting Property as a Married Couple
To inherit property as a married couple, both of you must meet the following requirements:
- You must be legally married at the time of death.
- You must have been living together in a marital relationship at the time of death.
- Your combined income at the time of death must be more than $250,000 ($500,000 if you are over age 70).
There is no one-size-fits-all answer to this question, as the best decision for you and your partner will depend on several factors specific to your situation. However, if you are both UK tax residents and are expecting children within the next five years, it may be worth considering including your partner in the inheritance tax threshold. This way, all assets (including property) that are passed onto them will be exempt from inheritance tax.
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