Skip to main content

Share your wealth

A look at minimising your Inheritance Tax bill through careful planning.

A married couple or civil partners can share their wealth - what they give to each other is free of inheritance tax. But this strategy - called estate splitting - has become less important now that they can leave each other their unused tax-free allowance.

Being able to inherit unused allowance means the couple's joint wealth up to twice the allowance (£650,000 in 2011-2012) can be tax-free regardless of which of them owns the assets. However, splitting your wealth means you can each make lifetime tax-free gifts.

In practice, it may not be easy to split your worldly goods and give them away during your lifetime. It may make more sense to pass all or most of them on o the survivor so he or she has enough to live on.

When you split a single asset between you, such as the family home, note that there are two ways to own it. If you own it as joint tenants, you each have equal shares in the asset and, when the first of you dies, their share automatically passes to the survivor.

If you own an asset as tenants in common, you each have distinct shares which can be different - for example, one person can own 40 per cent and the other 60 per cent. Moreover, you can specify in your will who should inherit your share when you die - it does not have to pass to your co-owner.

If you own an asset as tenants in common, you each have distinct shares which can be different - for example, one person can own 40 per cent and the other 60 per cent.

Moreover, you can specify in your will who should inherit your share when you die - it does not have to pass to your co-owner.

This information came from Personal Tax 2011-2012 by Sara Williams and John Bloxham. It is available for purchase here.

What Investment magazine: SAVE 47%

Growth Company Investor: free trial