Inheritance Tax Shock: Thousands at Risk of Unexpected Bill – ‘May Have to Sell Their Home’ | Personal finance | Finance

Over 70s choose to cohabit with their partner rather than enter into a real marriage or civil partnership. While it might seem like all the romance without any of the paperwork of a traditional relationship at this age, it could have disastrous consequences if either of them dies.

Since 2002, the number of people over 70 cohabiting with their partner has increased by 288%.

In 2002, in England and Wales, 45,066 people over the age of 70 cohabited with their partner without being married or in a PACS.

In 2020, that figure was a staggering 175,028.

Undeniably, this proves a change in expectations of what a relationship can look like. However, many couples may not fully understand what they are risking.

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Marriage in general is in decline, with other lifestyles like cohabitation slowly moving up the popularity scale.

However, in a somewhat modern society, some rules and regulations are now lacking in this regard, with Britons suffering the consequences if they are not careful.

Ellie Sawkins, Investment Analyst at Wealth Club, commented: “People over 65 are marrying and divorcing in greater numbers than ever before, creating an entire generation of money splicers and spreaders. But this growing demographic can unwittingly endanger the homes of their partners.

“The households of unmarried couples are subject to inheritance tax upon the death of one of the partners, leaving their share in a common dwelling to the surviving partner. This tax debt would be due within six months, and so for many it could mean that in addition to coping with the loss of a loved one, they are forced to sell their home, and quickly. A quick sale almost inevitably means having to reduce the price of the property, which is a double whammy for those who are already mourning the loss of a loved one. Cohabitants need to think seriously about how they approach this problem.

“While marriage and PACS are not suitable for everyone, they can offer significant inheritance tax advantages. There are also dangers. Marrying without a will could result in your children, possibly from a previous relationship, being deprived of the inheritance you intended to leave them, since your assets will pass to your new partner first, then possibly to their children in the event of marriage. their death. It is important that you clearly state your intentions in a will.


There are many ways to avoid a hefty inheritance tax bill, one of which is to use your spouse or civil partner as the sole heir.

However, without entering into a real marriage or civil partnership, this method, and others like it, will be useless.

Ben Alcock, Independent Financial Adviser at Continuum, said: “While there may be social and other obligations, without a formal contract of marriage or civil partnership, there are few automatic rights to money or even to things like a shared house.

“If either partner owns property in his or her name alone, the surviving partner has no clear right of ownership or habitation if the owner dies.”

While this certainly seems outdated and unreasonable, in the eyes of inheritance law, a blood relative who hasn’t spoken to the deceased for decades would have more rights to the estate than a common law spouse.

Even the taxman might claim more legal rights to the estate than a much-loved partner.

However, Mr Alcock noted that this was not an ultimatum to force couples into marriage or enter into a civil partnership and that there were other things that could be done.

For example, having a house in common ownership when first purchased can ensure that neither of them becomes homeless in the worst-case scenario.

However, this will not erase the burden of inheritance tax.

Mr Alcock continued: ‘When one of the partners of an unmarried couple dies, their estate becomes liable for the IHT on any assets above the IHT allowance. Worse still, the IHT will be payable before the assets can be transferred, potentially leaving the estate with a heavy tax bill to pay. The surviving partner may inherit less than expected. They may have to sell the house they shared to pay for it.

Another way to avoid this quiet problem is to properly plan for succession.

Mr. Alcock explained: “Estate planning is a complex area and requires in-depth knowledge of taxation and many other areas where rules and regulations have accumulated. Independent financial advisory firms such as Continuum can provide the expertise you need and work with other professionals, such as your lawyer and accountant, to get the outcome you and those you leave behind really want.

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