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I was just chatting with a friend following a funeral today. She has been with her partner for 30+ years but they are not married (and have no children). She owns an unencumbered holiday cottage in the country which they only use for themselves (not FHL/AirBnB/BTL). She is 66 and retired with a small pension. He owns an unencumbered house in London. He is still working in a good professional job but has no pension. They have had wills drawn up but no proper IHT/CGT advice from what I understand (other than they should get married).
They thought they were in a better position re: CGT by being unmarried and had planned to sell the cottage to fund their retirement. I was thinking that if they each transfer a share of each other's houses to the other and get married, they would be able to pool their CGT allowance to reduce the bill, it would also limit their IHT exposure. Would there be an additional SDLT cost for transferring a portion of their properties to each other (and there'd be conveyancing fees to add)?
Also, if they were married and she passed away first, her cottage would be close to the IHT amount so not so onerous, however, his house is worth significantly more so if he died while they were unmarried, even selling her cottage probably wouldn't cover the IHT bill.
I also suggested they could look at taking out a mortgage on one or both properties to release funds in their retirement and to reduce IHT but she wasn't keen on this as she's "old school" and thinks it's best to be debt free in retirement.
Can any of you more experienced PTers help clarify what would be their best course of action please? Am I on the right track? Is there anything I've overlooked or a better solution? (Obviously, I'll suggest they talk to a professional but want to give them an understanding of the issues and the questions they should be asking). Many thanks in advance for your help/advice.
I would be inclined to
Leave properties as they are but leave in wills to the other spouse
On death no CGT and if married no IHT between spouses
If intending to sell property after married, transfer the property in to joint names, no CGT between spouses, and then sell. If no mortgage simple forms from land registry to complete, you tube videos showing how forms should be completed.
If married could also look to transferring main residence into joint names as future provision for spouse.
If no mortgages conveyancer not required as forms are straight forward.
If they get married they would need to rewrite their wills.
Thanks EssexLL - this is very helpful.
If they do get married, do they actually have to fill in forms on LR if the properties are willed to each other (wouldn't the spouse automatically inherit?)
This is from memory so do check.
Marriage will revoke an existing will unless it states the will was made in contemplation of the marriage.
Transferring a main residence into joint names potentially protects part of the estate if the spouse who owns the property needs to go into care, you would need to check the rules for this.
The land registry forms are straight forward and no stamp duty to pay if transfer between spouses and no mortgage.
Only use the comments on here as a guide and take professional advice as not to do so could be expensive in the long run.
Thanks again EssexLL!