Getting hitched to make money isn’t a good proposal

LAST Friday night, 14 February, countless couples across the country will have enjoyed a romantic candlelit dinner to celebrate St Valentine’s day and in some cases, no doubt, the occasion will have culminated in a proposal of marriage.

Once officially engaged, the immediate priority for couples will then be ensuring that the seemingly endless “to do” list has been completed and the final preparations made for their big day. However, once the confetti has settled, and the honeymoon is just a memory, longer-term planning needs to be considered.

Tax planning is probably the least romantic reason for getting married but tying the knot brings significant tax benefits. Married couples or civil partners should consider transferring income-producing assets to ensure that both maximise their personal income tax allowances (currently £9,440 per annum).

Couples too should fully utilise the annual capital gains tax allowance (currently £10,900.Transfers between spouses and civil partners are completely exempt from capital gains tax, leaving two annual exemptions available. A spouse or civil partner with an asset standing at a capital gain can transfer part ownership of the asset to the other spouse or civil partner prior to the sale so that £21,800 is exempt from capital gains tax rather than only £10,900. These are big savings.

Married couples who are in a position to assist their children financially may consider setting up a family trust. Doing so will then allow parental funds to be passed to children when they are considered mature enough to handle these. It is sensible to obtain advice on the ways in which parents can assist their children financially, especially with a view to saving inheritance tax and capital gains tax.

Often wrongly perceived as being only relevant to older people, the granting of a power of attorney should also be viewed by married couples as an integral part of their estate planning as this allows a spouse and trusted individuals to deal with the granter’s financial affairs and personal welfare should the need arise though, for example, serious illness or sudden physical or mental incapacity.

Sometimes good intentions are just not good enough, however. Newlyweds often mistakenly believe that, on the death of one spouse, the new widow or widower automatically inherits the survivor’s estate. In fact when someone dies without making a will, their estate passes according to the law of intestacy which may result in claims by relatives (some of whom may have been very distant indeed). Therefore it is recommended that married couples, even young newlyweds, seek advice in preparing their wills as soon as is practicable. While every effort is made to anticipate future events when a will is drawn up, life has an uncanny habit of overturning the very best of predictions. Therefore having made a will, couples should just not leave it to gather dust in their lawyer’s safe. Ideally a will should be reviewed at least once every five years and certainly following any significant change in family or financial circumstances.

The ultimate inheritance tax plan is obviously for a married couple or civil partners to stay that way “till death do us part” as this will minimise or avoid any liability to inheritance tax (IHT) Transfers between spouses or civil partners during a lifetime and on death are entirely exempt from inheritance tax (subject to a limit of £325,000 if the recipient spouse or civil partner is non-UK domiciled).

It is worth pointing out that the family home is liable to count as an asset for inheritance tax purposes, meaning that IHT may affect households which do not consider themselves particularly wealthy.

As the Lennon-McCartney song says, “Money can’t buy you love”, but one cannot discount, either, the old adage that “when poverty comes in at the door, love flies out of the window”. In other words, money troubles can sour even the strongest and most stable of relationships. While marriage per se might not solve a couple’s financial problems, the tax regime favouring married couples will certainly help.

Just don’t go and spoil a romantic, candlelit meal by proposing marriage purely for tax reasons.

• Angela McMahon is a senior solicitor with Murray Beith Murray www.murraybeith.co.uk