Comedy legend Sir Ken Dodd recently passed away, aged 90. After previously being accused of tax fraud in 1989, from which he was acquitted, it seems Sir Ken may have had the last laugh.
Two days before passing away, Sir Ken Dodd married his partner of 40 years, Anne Jones. By doing so, he may have saved his estate a potentially costly Inheritance Tax bill.
Currently, an individual has a £325,000 nil rate band. This is the amount that an individual can pass free of inheritance tax. Home owners also have a residence nil rate band, allowing them an additional £100,000. Anything over this amount creates a liability for Inheritance Tax which is currently at 40%.
However, spouses can pass their assets to one another, free of inheritance tax. This means that for married couples who leave everything to each other, there is no inheritance tax to pay on first death regardless of the value of the estate.
Furthermore, for married couples who leave their estate to each other, their nil rate band allowance of £325,000 also passes to the surviving spouse. This means that when the surviving spouse passes away, they are able to combine the nil rate bands to leave £650,000 worth of assets, free of inheritance tax. Assuming they are property owners, they can also combine their additional residence nil rate band allowances enabling them to pass on a further £200,000 worth of property, tax free, subject to the surviving spouse leaving the family home to a direct descendant such as a child or grandchild.
These transferable advantages apply only to married couples. This means that regardless of how long partners have been together, and any children they may have together, they do not qualify for transferable inheritance tax relief.
By marrying his partner just before he passed away Sir Ken ensured that all his allowances were preserved and no tax was paid on his death.
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(Please note that in this article spouse / married also applies to civil partner / civil partnership)