“You don’t marry someone you can live with…
You marry someone you can’t live without” – unknown
Ok so it’s not the most romantic reason for a proposal, but there are many financial and practical reasons to tie the knot. As well as the joy of sharing your life with the love of your life there are also financial benefits that include tax breaks and welfare benefits not necessarily available to cohabiting couples. Below are just some of the key benefits of saying “I do”.
Favourable Tax
Married couples can choose how they want to be taxed – joint assessment, separate assessment, or single assessment whichever produces the most favourable tax advantages given your personal circumstances. You can share tax credits if one person earns less than the other. You can be taxed as one unit and allowed some tax concessions not used by one spouse to be transferred to the other. The standard tax cut-off point is €44,300 for a married couple (€35,300 if you’re single/co-habiting). If both partners are working you can earn up to €70,600 on the lower tax rate – €44,300 + €26,300.
Spouses’ don’t pay inheritance tax. By making a will a spouse can ensure their assets are left to their wife/husband without any tax implications.
Spouse has more rights
When a spouse dies, irrespective of a will or the deceased person’s wishes their spouse has a legal right to one-third of their estate. Co-habiting couples have no automatic rights to a share in their partner’s estate. They must be named specifically in a will to inherit and may be liable for inheritance tax.
The payout from a life assurance policy to yourself or your spouse is tax-free, provided you or your spouse were the original beneficial owners.
Spouses can gift each other money with limited tax consequences. If you are married you can transfer gains between spouses and offset the losses of one against the profit of the other. This is not applicable to cohabiting couples.
Pension Benefits
Pension benefits can be transferred to spouses. If a person dies before retiring, their spouse is entitled to death-in-service benefits from the pension pot. If the spouse has already retired then a pension can be paid to the survivor depending on the particular scheme. Make sure you speak to your financial adviser. When it comes to pensions, those who are not married or in a civil partnership cannot guarantee access to their other half’s pension savings.
No Stamp Duty for Married Couples
Married couples don’t have to pay stamp duty when they transfer assets from one to another. They are not subject to capital gains tax either.
Self-employed – tax savings if you employ your spouse
If you are self-employed or run your own business you can reduce your tax bill by employing your spouse and share tax credits. If the company funds a pension for you and your spouse it can result in significant income tax savings for you and the company.
Capital losses made by one spouse can be used by the other spouse to reduce a capital gains tax bill
If 2020 has taught us anything it’s that things can change at any time. So, it’s important to prepare for the unexpected. Have a solid emergency fund, a realistic budget, and a practical financial plan for the future. Above all, communication is key. Make financial decisions together, that way neither party is in the dark should something happen. Don’t be left thinking… if only…
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