IHT Planning for Same-Sex Couples & Civil Partnerships

Why IHT Planning Matters for LGBTQ+ Families

Inheritance tax affects same-sex couples and civil partnerships differently than many people realise. The good news: there are several strategic planning options available to reduce liability and protect your family's wealth.

Key Reliefs Available

Spousal Exemption

For married couples and civil partners, the unlimited spousal exemption means no IHT is payable on transfers between partners. This is one of the most valuable reliefs available.

Nil-Rate Band & Residence Nil-Rate Band

• Standard nil-rate band: £325,000 per person
• Residence nil-rate band: Up to £175,000 (if home passes to lineal descendants)
• Combined with spouse's relief: up to £1m per couple

Unmarried Partners

If you're not married or in a civil partnership, the spousal exemption doesn't apply. However, other strategies can help:

• Life insurance held in trust
• Gifting during lifetime
• Discretionary trusts
• Business property relief (where applicable)

Planning Strategies

1. Marriage or Civil Partnership

Simple but effective: entering a civil partnership immediately grants spousal relief on transfers up to the nil-rate band.

2. Lifetime Gifting

Small regular gifts to family and friends can reduce estate size over time using the annual exemption (£3,000 per person per year).

3. Trust Structures

Discretionary trusts can provide flexibility and protection, though they carry their own IHT implications. Seek specialist advice.

4. Life Insurance

A life insurance policy written in trust can provide funds to cover IHT liability, ensuring your beneficiaries receive their inheritance without forced asset sales.

Real-World Scenarios

Example 1: Female Same-Sex Couple

Emma & Sarah—a same-sex female couple with a £1.2m estate—entered a civil partnership to access spousal relief. Their planning:

• Equal asset split between partners
• Life insurance in trust for £240,000
• Clear wills reflecting their wishes for any children or family

Result: Potential IHT saving of £240,000+ compared to unmarried status.

Example 2: Male Same-Sex Couple

James & Michael—a male same-sex couple—married and structured their substantial property portfolio through their civil partnership. They used:

• Spousal exemption on main residence
• Business property relief on commercial holdings
• Lifetime gifting to adult children

Result: Reduced estate from £2m to under £1.3m effective IHT value through strategic planning.

Next Steps

IHT planning for same-sex couples and civil partnerships often involves unique circumstances. We recommend:

1. Review your current will and beneficiary designations
2. Understand your combined estate value
3. Explore marriage/civil partnership benefits
4. Consider life insurance and trust options
5. Seek specialist tax advice early

Ready to plan? Speak with our team about your specific situation. Contact us today.