Inheritance tax exemption ‘should apply to cohabiting siblings'
Lord Lexden wants a change in the law to allow siblings who live together to have the same inheritance tax exemption as married couples and people with civil partnerships.
Inheritance tax is set at 40% and becomes payable once the tax-free threshold of £325,000 has been passed.
The exemption for married couples and civil partners means that when one dies, their estate passes to the other without any need to pay inheritance tax. This does not apply to family members such as children or brothers and sisters.
Lord Lexden has put forward an amendment to the Civil Partnership Act 2004 to include siblings who have cohabited for 12 years or more.
The issue was highlighted by the Times newspaper in an article about sisters Catherine and Virginia Utley, who have lived together for 30 years. They say that when one of them dies, the surviving sister will have to sell their home in London to pay the £140,000 inheritance tax that will be due under the law as it currently stands.
Catherine Utley told the Times: “The burning injustice about all this, and the reason it matters, is that people in our position are left having to sell the joint home on the death of the first sibling.
“I was a single mum after an unplanned pregnancy and Virginia stepped in to help. We have lived together since buying our first flat in the mid-Eighties and my daughter Olivia was brought up by us both.
“Depriving someone of their home at the moment of bereavement is the worst injustice of all. If inheritance tax isn’t payable until after the death of the second person, that would go a way towards sorting it out.”
Speaking about his amendment, Lord Lexden said: “We are talking about blood-related co-habitees, not just any two persons. My bill requires sibling couples to have lived together for 12 years and to have joint property and financial affairs.”
We shall keep clients informed of developments.
Please contact Lisa McBrearty or Jamiel Zaman if you would like advice about inheritance tax and financial planning. A little forethought now could save you and your family significant sums in the future