Mr Jones and Mr Hook are unmarried, with no immediate plans to wed or enter a civil partnership. They have no children, and own a house together worth £500,000, with joint cash assets and investments of £150,000. Mr Jones and Mr Hook wish to benefit each other, and then on second death divide the estate equally between their respective siblings. They also wish to discuss Inheritance Tax (IHT).
The issue for Mr Jones and Mr Hook is that the Nil-Rate Band is not transferable between unmarried partners. The Nil-Rate Band is the amount that any individual can give away, free from IHT. It is currently set at £325,000.
We could set up a simple Will gifting everything to each other on first death, but in this scenario this is very likely to result in a sizeable IHT bill of approximately £130,000 on second death. We would be able to advise on the use of a simple discretionary trust on first death to ensure that the Nil-Rate Band of the first to die is not wasted, which could reduce the IHT payable to zero.