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bigduckontax
bigduckontax, Accountant
Category: Tax
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I am a widower dob 250634 and hope to get married to a widow

Customer Question

I am a widower dob 250634 and hope to get married to a widow dob 170235. She owns a bungalow value approx £200.00 which is rented out and has further capital of £50,000.00. We live in my house value £325,000.00 and I have further capital of £70.000. Can we elect to keep our finances separate after marriage to minimise IHT liability. If not how can we minimise the IHT
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.

Hello, I'm Keith and happy to help you with your question.

Married couples have, for tax purposes been separated, long since. However, there are some interfaces.

For example from 15/16 tax year one spouse will be able to transfer up to 1K of their unused personal allowance to the other.

IHT is another interface area. If one dies before the other any of their unused 325K allowance for IHT purpose may be added to the survivor's 325K to reduce their exposure to the tax. Of course, if there is no surplus this is not possible. Unfortunately your question says her bungalow value is £200, perhaps you mean 200K. If so this would leave 75K of her nil rate IHT allowance to pass on to you should she predecease you. Inter spousal bequests and transfers do not attract tax and if such bequests and gifts are made they are not subject to IHT anyway. You might have inherited some of your first wife's 325K allowance also; worth checking.

i do hope I have been able to set your mind at rest on this matter and given you some food for thought.

Customer: replied 2 years ago.

Thank you. I am feeling better since it is all good news up to now. Arising there are two more questions which come to mind.

1. My wife dies in October 2011 and she had no capital. Does that mean that I have inherited her IHT allowance.

1. Should I re-decease my wife after we get married in July I would like her to continue living in this house until she dies so will my unused allowances pass to her.

Thank you.

Expert:  bigduckontax replied 2 years ago.
Correct on question one.
If you bequeath your possessions to her there is no IHT; it is an inter spousal transfer. Any unused portion of your allowance she will inherit.
Tip, get round to the Registrar and get married NOW! You might fall under a bus before July! Basically you might die before the marriage date so to blazes with plans, arrangements, relatives and public opinion; do it at once.
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Customer: replied 2 years ago.

Thank you. Very good and sound advice but our plans are made and we have good wills which will be reviewed to take effect on our marriage day.

1. Have I inherited my deceased wife's IHT.

2. How do I transfer some of my allowance to my new wife. I am a higher rate tax payer.

Expert:  bigduckontax replied 2 years ago.
Remember that on marriage existing wills, unless drawn up in contemplation of marriage, are revoked by the marriage. In the Church of England ceremony 'With all my worldly goods I thee endow;' actually means something in English Law!
You would inherit your deceased wife's IHT allowance. You cannot transfer any of your IHT allowance to your new wife save by death and in any event all inter spousal bequests and transfers leave the allowance intact.
Your new wife can transfer up to 1K of her personal allowance to you for Income Tax purposes from the 15/16 tax year.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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