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Top five considerations for couples planning for the future

Countless couples will enjoy a romantic candlelit dinner to celebrate St Valentine’s Day and in some cases no doubt, the occasion culminating in a proposal of marriage.

The immediate priority for couples will then be ensuring that the seemingly endless wedding to do list has been completed and the final preparations have been made for the big day. However once the confetti has settled, longer term planning needs to be considered.

Marriage should not be taxing

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 £11,000). Couples should fully utilise the annual capital gains tax allowance (currently £11,100).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 £22,200 is exempt from capital gains tax rather than only £11,100.

The patter of tiny feet 

Those who are in a position to assist their children financially may consider setting up a family trust. This allows funds to be passed to children when they are financially mature. It is sensible to obtain advice on the ways in which parents can assist their children financially with a view to saving Inheritance Tax and Capital Gains Tax in the future.

Peace of mind  

Often wrongly perceived as being only relevant to older people, the granting of a Power of Attorney should be viewed by married couples as an integral part of their estate planning. This allows a spouse and trusted individuals to deal with the granter’s financial affairs and personal welfare should the need arise.

With the best will in the world

Sometimes good intentions are just not good enough. Newly-weds often mistakenly believe that a spouse 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. It is recommended that married couples seek advice in preparing their Wills.

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. Ideally a Will should be reviewed at least every five years and certainly following any significant change in family circumstances.

Till death do us part 

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

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 at the window’. In other words, money troubles sour relationships. While marriage may 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.

For further information, please contact us on 0131 226 6541

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