Need advice- jointly purchasing property- US citizen w/ UK partner- tax planning

Hello helpful friends,

My partner and I found a flat we love and really need some advice on jointly purchasing property and tax planning. The facts:
- I am a US citizen
- He is a British citizen
- We are not married (but our relationship is as such)
- The mortgage would be off my salary only (he's a student).
- I would also be contributing most of the deposit.
- I am a higher rate taxpayer in the UK; he is taxed at the lowest rate or not at all.

I would be so grateful for advice on how to structure ownership please as well as gift tax and other US/UK tax implications. 
   1)- If we are comfortable with any split, what is an ideal ownership split to avoid tax complications?
   2)- Given the mortgage would be off my salary only and I would be paying most of the cash deposit for the flat, what are the gift tax implications?  I understand that in our current unmarried state, I can only gift $15k to him without filing gift taxes. If we were to marry, that would increase to $159k. What counts as a gift here (e.g., contributions to the deposit in a different ratio to the ownership split? Is the mortgage amount included?)? And when does that apply? -  now, at the purchase of the property, or would that apply only at the eventual sale of the property? Should we get legally married asap?
   3)- What other tax implications do I need to think about as the US citizen here regarding property ownership? Also, would future capital gains upon selling the property be split in the same way as ownership (e.g., if I owned 10% would I have to pay CGT on 10% or 100% of the proceeds?)
   4)- What are the pros/cons of being married with regards to US taxation? I think I would hit some of the income limits sooner if I move from single to married filing separately but don't know much else.

Many thanks for your help!!
Best wishes,
M and her broke but wonderful (and lucky? ) boyfriend 

Do NOT put a house you are buying and paying for in his name AT ALL.

If/when you marry, that’s when he can be entitled to partial ownership.  Until then, just have him set as beneficiary in your will.

You won’t have any tax implications at that price point.  You get $250,000 in capital gains allowance.

Unless you are in an extremely metropolitan area (London), I’d encourage looking at somewhere with a garden.  My friends in flats are “stuck” as they are not desirable on the market for resale.

Thank you. Is that because of the risk if we separate?
The property is £700k in central London.

Thank you. Is that because of the risk if we separate?
The property is £700k in central London.

Ah, sorry, I misread the first time thinking it was £159k!

Correct, I wouldn’t have his name as ownership.  I’ve been burned.  There is a saying “You don’t divorce the person you marry.”  It’s 100% true.  That’s not to say you and your partner won’t be together longer than me and mine!  Just protect yourself.  If you deliberately sign paperwork gifting him the property....  it could be catastrophic in the future.  How can you claim the place is yours if you’ve signed part of it over?

We make all investments in my husbands name.  His name is on our properties.  I literally have all my eggs in his basket.  The ONLY reason I’m okay with it, is in the event of a divorce, the UK is very equitable in splitting assets.  That marriage certificate protects me.

Sorry, I know this is SO not answering the question, but just consider it seriously.

But the main fact remains the same, no taxes for the first $250,000 in capital gains.  That doesn’t change if you marry or sign part over or anything.  It’ll always be $250k (unless they raise the capital gains allowance).

You may want to look at Estate tax/planning too. Upon your death there maybe limitations to what can be inherited from you and the thresholds. As you’re not married, the IRS may have onerous reporting. Not meaning to be grim, you may need to look at the plans you have of the property purchase and alignment or your will(s). U.S. & NRA Estate planing is complex.

You may want to look at Estate tax/planning too. Upon your death there maybe limitations to what can be inherited from you and the thresholds. As you’re not married, the IRS may have onerous reporting. Not meaning to be grim, you may need to look at the plans you have of the property purchase and alignment or your will(s). U.S. & NRA Estate planing is complex.

Sounds like a good subject to discuss. We plan on leaving some money and stuff to family who are NRAs. (We are dual USC/UKC living in England).

Do you have any good sources we could look at?

It’s a complex subject. I have briefly read the U.S. & U.K. Estate tax agreement. In essence you can take a credit for IHT paid to HMRC. I ‘think’ that there are limitations that a USC can leave to an NRA on assets that are situated stateside free of tax, I read $60k.
I believe that it’s vital to have no ‘Trust’ ‘Trusties’ or beneficiaries mentioned in a Will. Trusts at death is standard provision in Will writing and STEP. The filing of a 3520, 3520-A has profound consequences and is above the understanding of even some experts. I’m unsure how a U.K. law firm
Would report to the IRS on an annual basis and also be required to obtain an EIN. The more I read, the more complex things become...

Does a USC living in the UK have the usual first $11m free of US Estate tax?  We don't expect to leave an estate large enough to even be subject to UK IHT and the will is simple enough, no trusts involved, just the family house to be left to the 2 children along with savings split between them.  Only assets in the USA will be our Roth IRAs, each with our 2 children as beneficiaries.

Does a USC living in the UK have the usual first $11m free of US Estate tax?  We don't expect to leave an estate large enough to even be subject to UK IHT and the will is simple enough, no trusts involved, just the family house to be left to the 2 children along with savings split between them.  Only assets in the USA will be our Roth IRAs, each with our 2 children as beneficiaries.

I'm reading my way through all of this, definitely no expert. USC to USC has an unlimited transfer, the issue is USC to NRA. I think this is much lower, (I was reading less then $200,000). You need to check that you don't have a testamentary will, as in Last will and Testament. Again, i'm no lawyer, but your estate becomes a Trust on death and in your case with your two children, the house would go into 'Trust' and they would be the beneficiary of a foreign trust. Cash etc, where there is a straightforward inheritance is easy. You'd need to read your U.K will for any 'Trust'
As a USC, you are unable be a trustee of a village hall with out the huge reporting annually. Even if there is no income...
U.S. Estate Planning is almost worthy of it's own section, something we all need to deal with-no getting away from it. Tax Attorney territory for sure.

Back to the original questions a bit:
- Does the structure of ownership have to reflect the actual amount paid in deposit  and/or the weighting of the salary for the mortgage?
- How do expat / UK couples structure ownership of property?
- If I make a gift above the limit and it reduces my lifetime gift limit by X and then later the gift limit is reduced to Y, would I still have the full Y amount available to me or would it count against that limit making it Y-X?
Thanks!

Back to the original questions a bit:
- Does the structure of ownership have to reflect the actual amount paid in deposit  and/or the weighting of the salary for the mortgage?
- How do expat / UK couples structure ownership of property?
- If I make a gift above the limit and it reduces my lifetime gift limit by X and then later the gift limit is reduced to Y, would I still have the full Y amount available to me or would it count against that limit making it Y-X?
Thanks!

I’ve wondered about the last point as well and don’t know the answer. I have filed IRS form 709 in the past when gifting money to a child and wondered the same thing.  At least in the UK there is a 7 year window so that any gifts are permanently wiped from the record.

The article below states the huge difference between a gift given to a spouse who is not a USC.

https://www.thebalance.com/when-to-file-gift-tax-return-3504960

Some Gifts Are Exempt
An unlimited marital deduction covers gifts made to spouses who are U.S. citizens. You can give as much to your spouse as you like, either before or after your death, free of tax.

Gifts made to a spouse who isn't a U.S. citizen are taxable, however. The threshold is $157,000 as of 2020, up from $155,000 in 2019. Gifts exceeding this amount are subject to the gift tax.