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  • pinksonia
    inheritance tax advise plzzzzz
    trying to find out some advise, so that the tax man doesnt get his hands on my grandads hard earnt money in the furture, why should they after all.

    my grandad owns his own home and is windowed, his son lives with him still, not a young son though, if that makes any difference.

    his home is worth over 300,000

    when the time comes and my grandad passes away his house is left to 3 children, half of the house goes to 1 son, the one that lives there. and the 2 quarters go to the other children,

    does that mean even though it is split between 3 children, would you still have to pay that 40% inhertiance tax.

    if so wud this common tenancey agreement thing ive read about work on that situation.

    if not please help in any way u can,

    thanks
    sonia
    • localhero
    • By localhero 8th Aug 07, 3:25 PM
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    • 660 Thanks
    localhero
    Hi Sonia,

    When your granddad dies inheritance tax will be calculated as follows: Total value of all his assets (house, savings, investments etc) less any debts & funeral expenses. The first £300,000 under the current rules is taxed at 0% the remainder at 40%.

    The inheritance tax is usually deducted before the estate is divided up. So unless grand dad gets married and leaves money to his spouse or to charity, it looks like there is a future liability.

    Since one of his sons lives in his house with him (and I assume this son doesn't own a property of his own elsewhere), your granddad could make a gift of half of the house to him now. If he then survives for 7 years, the value of his estate upon death will be reduced by the value of this gift. Therefore it could reduce or even eliminate the inheritance tax liability.

    To do this would be relatively straightforward - he could do it himself for nothing with a little help from the Land Registry. He needs to own it with the son as tenants in common. He then needs to make a will leaving his half of the house to the two other children.

    The downside to this is if he dies within 7 years. Although taper relief is supposed to reduce the inheritance tax due on gifts, in practice this is useless, because the value of the gift would absorb the value of his 'nil rate band' allowance first.

    So depending on your granddads age and state of health this might be worth considering. If however he's very old and in poor health (and unlikely to make it for 7 years) avoiding the inheritance tax becomes a little more tricky (not impossible if hell-bent) but not easy.
    Last edited by localhero; 08-08-2007 at 3:39 PM.
  • pinksonia
    thanks u local hero

    he isnt in great health, bit of a dodgy heart at mo, wish he could live for 7 more years but unfortunately i dont no whether that will be the case or not.

    the son doesnt own his own property, is it worth goin ahead with the tenants in common neway just in case?

    wat is can we do?
    • localhero
    • By localhero 8th Aug 07, 5:09 PM
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    localhero
    It is a gamble but it could be worthwhile doing. If he doesnt make it for seven years then effectively the value of the house including the gifted part will be taxed in the normal way. Since there's not much to lose (apart from a possible land registry fee), I personally probably would do it.

    What's the value of his estate and does he have any debts (mortgage etc)?
  • pinksonia
    the house hasnt been valued, but the house prices r def more than 300,000 round wher he lives.

    he does have any debts and the morgage is paid.

    spoke to my mum about it and we said we should get the house valued, also she said that on his will it aready states half of the house goes to the son n the 2 quarters left go to the other 2 children.

    does than mean u dont have to do the tenants in common thing as its already stated in the will. or has it got to be done anyway.

    if so wher do you do it, and cheap as poss

    many thanks
    • localhero
    • By localhero 8th Aug 07, 10:36 PM
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    localhero
    The point I'm trying to make is that if the value of his estate (assets less debts) is greater than £300,000 when he dies anything over £300,000 will be taxed at 40%.

    If he gives half of the house now to the son living there and survives for 7 years then his estate will be worth a lot less when he dies therefore less/no inheritance tax to pay.

    The Land Registry will be able to help if he makes the gift now, alternatively a solicitor will charge £200 - £300 to do it.
    Last edited by localhero; 08-08-2007 at 10:40 PM.
  • Francine
    inheritance tax
    hello
    not sure what I'm supposed to do yet to post a message, this site looks confusing to the eye!
    Re Localhero message 15, Harryhound mentions having to pay CGT on selling a parent's property if they own another property as well, presumably in the UK. My sister and I are tenants in common with our mother. She lives in her own house, my husband and I own a house in France so presumably just my sister would be liable for CGT
    thanks
    • vix2000
    • By vix2000 12th Aug 07, 8:58 PM
    • 1,092 Posts
    • 406 Thanks
    vix2000
    hi. this thead is very informative, even if I don't understand it all. How does equity release cloud the situation? my parents house is worth 350000, and goes to each other on death. Say the surviving spouse took 50000 equity release would this mean their estate would be IT free?
    Also I am a bit confused re: CGT. Does his mean that an estate consisting of a 350000 property would pay 40% on the excess 50000, then CGT on the sale proceeds?
    • marbella
    • By marbella 12th Aug 07, 9:40 PM
    • 795 Posts
    • 801 Thanks
    marbella
    I am also a bit confused at the moment. When my husband died, just less that 2 years ago, we had our wills made so that everything passed to the other on the first death. Am I right in thinking that I should now be going to re-write my will before the 2 years are up (if this makes sense). I have loads of questions to ask but don't want to look silly when I get to the solicitor. Any help would be appreciated. thanks
    • localhero
    • By localhero 13th Aug 07, 1:34 AM
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    localhero
    Sav4it, that's incorrect.

    Not all the beneficiaries need to agree. It is only the beneficiary giving up the benefit. The new beneficiary(s) will also be parties to the deed, and usually out of courtesy the original executors (who must in any case be parties if any additional tax arises).

    Therefore let's assume an example where a will is split 3 ways in equal shares. If one of those beneficiaries wishes for their share to pass to their own children instead, then they can do this because it doesn't affect the other 2 beneficiaries. If either of the other 2 of those beneficiaries then later on (but within 2 years) wish to do likewise with their own share, they themselves can also execute a deed of variation.

    To vary the whole estate, then of course all 3 beneficiaries would then need to agree, since they would be giving up a 1/3 share.
    Last edited by localhero; 13-08-2007 at 1:47 AM.
    • vix2000
    • By vix2000 14th Aug 07, 6:01 PM
    • 1,092 Posts
    • 406 Thanks
    vix2000
    hi. this thead is very informative, even if I don't understand it all. How does equity release cloud the situation? my parents house is worth 350000, and goes to each other on death. Say the surviving spouse took 50000 equity release would this mean their estate would be IT free?
    Also I am a bit confused re: CGT. Does his mean that an estate consisting of a 350000 property would pay 40% on the excess 50000, then CGT on the sale proceeds?
    Originally posted by vix2000
    Can anyone explain, please?
  • EdInvestor
    How does equity release cloud the situation? my parents house is worth 350000, and goes to each other on death. Say the surviving spouse took 50000 equity release would this mean their estate would be IT free?
    Yes, but it might be smaller than you expected.Don't forget you have to pay back the original loan and the rolled up interest on it out of the proceeds of selling the house. To get to the desired 300k figure you would probably be better to borrow 20-25k and then keep an eye on the rolled up interest figure as time goes by. You can also set a total equity release figure but then draw it down in tranches over the years.This reduces the cost of interest rollup and enables you to fine tune the amount for tax reduction purposes.

    Also I am a bit confused re: CGT. Does his mean that an estate consisting of a 350000 property would pay 40% on the excess 50000, then CGT on the sale proceeds?
    No.There is no CGT on death.
    • marbella
    • By marbella 16th Aug 07, 3:44 PM
    • 795 Posts
    • 801 Thanks
    marbella
    Thanks for all you advice. I have been to see the solicitor who is now looking through all the info regarding 'discretionary trusts' and 'deed of variation'. I am just not quite sure if I am doing the right thing as I don't know if all of this will have tax implications and also if I wanted to sell my property in the future would I be able to claim all of the money myself of would the 'discretionay trust' come into play. Oh I am so confused by it all and want to do the right thing.
    • localhero
    • By localhero 16th Aug 07, 7:45 PM
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    localhero
    Hi Marbella,

    Yes you have done the right thing. I don't know why the solicitor couldn't advise you there and then about a suitable course of action. I suspect they may not be overly conversant with D.O.V. (as very few actually are).

    If they do probate work they may be able to help. If not contact the law society to find a probate lawyer in your area and ring them first to see if they know their stuff. Also ask what the cost will be because they can be very expensive.

    There will be tax implications, but the ultimate aim is to save your family money when you die.

    With the variation, you should be able to borrow from the deceased's estate and you should effectively still own the property. If your joint estate is greater than £300k, it will be worth doing.

    If you get no joy from the solicitor pm me, as I know people who specialise in this area who definitely will be able to help you.
    Last edited by localhero; 16-08-2007 at 7:48 PM.
  • MickKnipfler
    What happens if a property owner is tax resident in Cyprus on death but has a large estate in the UK?
    • marbella
    • By marbella 16th Aug 07, 9:32 PM
    • 795 Posts
    • 801 Thanks
    marbella
    Thanks localhero, I am off to the solicitor tomorrow so hope he has all the information I need. As my home and assets amount to about £750k and with only one child and we have no debts or mortgage I hope that I am going to get the right advice. I don't know what sort of tax implications are involved, so at the end of the day I am going to ask whether it would be just worth my while changing my will to the way I want it and then take out a life assurance to cover any potential IHT and put the policy in trust. So many questions and so little time. I know I have to do a 'deed of variation' to my husbands will within 2 years of his death and it is coming up to that time. I have written loads of questions down for tomorrow, so I should know which way to go. Thanks.
  • torryquine
    Discretionary Trusts/EPAs in Scotland
    Lot of useful and interesting information here. Can anyone pleaseadvise if the rules on IHT/wills/trusts and Power of Attorney are the same under Scottish Law.
  • Andrea24
    Inhertance Tax in Scotland
    Does anyone know the legal implications in Scotland? We've been told that we cannot register as tenants-in-common in Scotland because the law is different. It seems difficult to find objective advice on avoiding IHT if you live in Scotland. Any advice?
    • localhero
    • By localhero 12th Sep 07, 3:12 PM
    • 812 Posts
    • 660 Thanks
    localhero
    The laws are different in Scotland on Wills and Enduring Powers of Attorney, and as such I'm not familiar with them.
    Last edited by localhero; 12-09-2007 at 3:17 PM.
    Public wealth warning! It's not compulsory for solicitors or Willwriters to pass an exam in writing Wills - probably the most important thing you’ll ever sign.

    Membership of the Institute of Professional Willwriters is acquired by passing an entrance exam and complying with an OFT endorsed code of practice, and I declare myself a member.
  • TheFox
    All manner of things!!
    Hi Local Hero............My wife and I have consulted with a will writer and I wonder if you could possibly answer a few questions I have on Wills?
    1) What sort of advice should we receive about discretionary trusts? I can see the advantages but what about the disadvantages?
    2) We have been told that if we set up discretionary trusts will we need to name a professional body in the will to act as executor - is this correct? (they have suggested one professional firm of executors)
    4) If I were to die, once named in the will can these executors be removed?
    3) Do pensions and AVC's need to be included in a persons estate?

    Many thanks for your time.
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