CGT and IHT guidance for unmarried couple with 2 residences?

I was just chatting to a friend following a funeral today. She has been with her partner for 30+ years, but they are not married (and have no children). She owns an unencumbered holiday cottage in the country which they only use for themselves (not FHL/AirBnB/BTL).

She is 66 and retired with a small pension. He owns an unencumbered house in London. He is still working in a good professional job but has no pension. They have had wills drawn up, but no proper IHT/CGT advice from what I understand (other than they should get married).

They thought they were in a better position re: CGT by being unmarried and had planned to sell the cottage to fund their retirement. I was thinking that if they each transfer a share of each other’s houses to the other and get married, they would be able to pool their CGT allowance to reduce the bill, it would also limit their IHT exposure.

Would there be an additional SDLT cost for transferring a portion of their properties to each other (and there’d be conveyancing fees to add)?

Also, if they were married and she passed away first, her cottage would be close to the IHT amount so not so onerous, however, his house is worth significantly more so if he died while they were unmarried, even selling her cottage probably wouldn’t cover the IHT bill.

I also suggested they could look at taking out a mortgage on one or both properties to release funds in their retirement and to reduce IHT but she wasn’t keen on this as she’s “old school” and thinks it’s best to be debt free in retirement.

Can any of you more experienced P118ers help clarify what would be their best course of action please? Am I on the right track? Is there anything I’ve overlooked or a better solution? (Obviously I’ll suggest they talk to a professional but want to give them an understanding of the issues and the questions they should be asking).

Many thanks in advance for your help/advice.

Heather

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