Til Death (and Inheritance Tax) do us part
Ricky Gervais, Marriage and Inheritance Tax: What Does It Mean for Couples in Northern Ireland?
Ricky Gervais has recently made headlines after revealing that he intends to marry his long-term partner, Jane Fallon, with inheritance tax playing a significant part in the decision. The couple have been together for more than 40 years but have never married, with Gervais reportedly saying tax is the reason the couple may now tie the knot.
While the story has attracted attention because of Gervais’ wealth and his long-standing views on marriage, it raises an important question for many couples: what difference does marriage make to inheritance tax and, importantly, to your wider legal position?
For couples in Northern Ireland, the answer is particularly relevant when considering both Tax planning and matrimonial law.
Marriage and Inheritance Tax
At the time of writing, transfers between spouses and civil partners in the UK are generally exempt from inheritance tax. This means that, subject to the relevant rules, assets passing from one spouse to another either on death or during lifetime are exempt from Inheritance Tax.
By contrast, transfers between cohabitants/ unmarried partners do not benefit from spousal exemption, regardless of the length of the relationship or how long a couple have lived together.
The current standard inheritance tax rate is 40%, with the nil-rate band currently standing at £325,000. There may also be a Residence nil-rate band available where relevant conditions are met, and unused allowances may be transferred to the surviving spouse or civil partner on the first death.
For many estates, whether or not the deceased was married or in a civil partnership can have a substantial effect on the timing and amount of inheritance tax payable.
It is important to note that marriage or civil partnership does not necessarily eliminate inheritance tax altogether, and careful estate planning remains very important, particularly considering the significant changes to the Inheritance Tax treatment of unused pension funds and pension benefits due to come into force from 6 April 2027.
But marriage is about more than tax
For couples considering marriage or civil partnerships primarily for financial or tax reasons, it is important not to overlook the wider legal consequences.
In Northern Ireland, the court has broad powers to make financial provision on divorce. Its aim is to achieve a fair outcome, taking into consideration the circumstances and financial needs of both parties. The court can make orders in respect of the distribution of the family home, savings, investments, pensions and other assets. Parties do not always view court-ordered financial outcomes on divorce as fair, and this can be particularly so when one party entered the marriage with substantial pre-existing wealth.
For someone in a position similar to Gervais, the decision to marry has implications other than tax-planning. A person with significant assets may wish to consider, before marriage, how they would like assets to be structured in the event of divorce. Whilst parties cannot override the jurisdiction of the court, they can take steps to record their intentions, which can carry substantial weight in the event that the court is called on to exercise its discretionary powers on divorce.
What about couples who choose not to marry?
The Gervais story also reminds us of the importance of understanding the consequences of remaining unmarried.
Despite popular belief, there is no general ‘common law marriage’ status which automatically provides the same inheritance or matrimonial rights as marriage for co-habiting couples. This means that if the relationship breaks down, the court does not have the power to assess the parties’ circumstances and, for example, decide that each is entitled to 50% of the assets, taking into account the length of the marriage, the needs of the parties and the contributions made by both. Instead, it can only adjudicate on what property rights exist. This can lead to outcomes which are perceived as unfair, particularly where one party has come to the relationship with assets and these have remained in their name.
A joined-up approach to planning
The key lesson is that tax planning and family law planning should not be considered in isolation.
Whilst marriage may provide valuable inheritance tax advantages and greater protection on death, it may also changes the parties' positions if the relationship later breaks down.
Equally, couples who choose to remain unmarried should consider whether their wills and wider estate planning properly reflect their intentions, rather than assuming that the law will provide the same protection as it would for a married couple.
The Gervais story may be unusual in scale, but the underlying issue is not. Whether you are considering marriage, choosing to cohabit, or reviewing arrangements after many years together, it is sensible to take legal advice to ensure that both the lifetime and succession consequences of your decisions are properly considered.
