There has always been an inherent conflict between tax advantages, which legislation gives a couple when they get married, and the implications for asset protection.
For political and societal reasons, marriage historically has been seen as something to be encouraged.
The tax benefits of getting married are evidence that various governments over the decades have seen long-term stable relationships, underpinned by marriage, as being something to be promoted through an advantageous tax treatment.
However, from a family law perspective, getting married opens opportunities to a whole range of potential claims, which each party to the marriage may have against the other should the relationship not succeed at some point in the future.
This article explores that inherent conflict between the tax advantages of getting married and the disadvantages brought about in terms of asset protection, and how our clients may best protect themselves depending on what they feel is most important to them.
A solution discussed in this article is nuptial agreements; we have witnessed a 750 per cent increase in agreements from 2021 to 2023, and will explore the reasons for this boom in activity.
Background
Data from the Office for National Statistics suggests the number of marriages in the United Kingdom has fallen to slightly more than 200,000 in 2019 from its peak at more than 400,000 in 1972.
The average age for those getting married has also increased by just over 12 years, to the mid to late 30s by 2019 from the mid 20s in 1972.
At the same time, the UK population has grown 21.4 per cent during that same period, which clearly highlights that the number of people getting married on an annual basis has fallen quite dramatically by more than 50 per cent based on the size of the population.
Today, we live in a more diverse society, with individuals getting married more than once or deciding not to get married at all, but to stay in long-term relationships. Throughout this article any references to marriage also apply to entering into a civil partnership.
Getting married
Since November 12 1974 there has been no limit to the benefit of spouse exemption. Plainly speaking this means that anything you leave to your spouse, as long as you are both domiciled or both non-domiciled in the United Kingdom at death, is without limit.
Your estate can be worth millions of pounds, and regardless of the value or the makeup of your assets, if you leave your estate to your surviving spouse no inheritance tax will be payable at that moment in time.
If one party to the marriage was domiciled and one party non-domiciled, then unlimited spouse exemption does not apply, and you will need to take separate advice as to the implications of leaving assets to each other on death.
From a Private Client Law perspective therefore, many of the conversations we have with our clients involve touching on the possibility of getting married or entering into a civil partnership if they have not already done so.
