How to value the Estate

Yorkshireman99 wrote: »

If I have understood you correctly. Unmarried and no children.


At DOD estate is £500,000 in 2017 with gift of £106,000 made in Jan 2014. So is the IHT calculated on £500,000 plus £100,000?

That is correct, and as GM4L has pointed out the responsibility for the tax on the £100k is with the recipient

Secenario 2



Estate at DOD in 2021 is £500,000 but gift not added back so IHT calculated on £500,000. TIA

Also correct the PET is now totally exempt.

getmore4less wrote: »

Which happens to be Zero.

All the tax due is by the estate

The tax falling on the recipient if the donor does not survive seven years is what is the problem in the case I was discussing off forum. It seems that the donor had not been told that the tax might fall on the recipient. The recipient is not in a position to pay as the money was used to pay off a loan. Howver the donor has willed the remaining bulk of their estate to the donee so I suppose who pays is largely academic. It still seems bizarre to me that taper relief should not apply regardless.

Just to add - taper relief does not apply if the donor still lives at the house, unless they pay full market rent for the share they do not own.

So the house is likely to be considered as part of the estate, as the transfer will be seen as a gift with reservation.

Despite this, there will be CGT to pay on the increase in value between the date of transfer and the date of sale. This may be zero, as each recipient will likely have their annual CGT allowance to pay.

I wish people wouldn't give the taper relief advice, it is completely incorrect and misleading not only to the OP, but also to other lurkers who might then do something similar themself.

In short - transferring a house to your children's names for 'simplicity' or any other excuse is very unlikely to be a good idea, no matter how long they live afterwards it is likely to cost in more tax rather than save. I also wish people would be honest and admit that the reason they are doing this is usually to avoid hypothetical future care costs rather than other vague excuses. Sorry rant over.

cte1111 wrote: »

Just to add - taper relief does not apply if the donor still lives at the house, unless they pay full market rent for the share they do not own.

So the house is likely to be considered as part of the estate, as the transfer will be seen as a gift with reservation.

Despite this, there will be CGT to pay on the increase in value between the date of transfer and the date of sale. This may be zero, as each recipient will likely have their annual CGT allowance to pay.

I wish people wouldn't give the taper relief advice, it is completely incorrect and misleading not only to the OP, but also to other lurkers who might then do something similar themself.

In short - transferring a house to your children's names for 'simplicity' or any other excuse is very unlikely to be a good idea, no matter how long they live afterwards it is likely to cost in more tax rather than save. I also wish people would be honest and admit that the reason they are doing this is usually to avoid hypothetical future care costs rather than other vague excuses. Sorry rant over.

Thank you. You have got to the root of the problem. Most of the sites include examples that don't cover the very simplistic case I have been discussing with someone off forum who has no internet access. That was why I asked for specific answers to ta specific situation. The replies that cover other, more complex scenarios are, frankly, of no interest whatsover to me at this time. The person I have been discussing it with, and myself, have become thouroughly confused by the whole thing partly because he was told, by his, now ex, IFA that the tax would be subject to taper relief. Maybe we are just plain stupid! As we now think we understand it taper relief is a red herring in the specific case we are concerned with. So until the seven years have expired the whole of the gift is added to value of the donor's estate for the calculation of IHT. This is not a particular problem to the donor, they just want to know the facts! To GM4L I would just say that making slightly snide remarks, really is not in the spirit of the forum. Instead of answering the specific question, not for the first time I might add, you chose instead to complicate matters just to show off your own knowledge. Please desist!

Since when are you the arbiter of what, when and where anyone should post? That is the function of the board moderators not some self appointed know all. As it happens, with one exception, I have never had to deal with an estate that had a significant gift before that might have affected IHT. All but one of my friends or relatives had little money to leave. For the one that did I took paid for advice on the valuation and IHT submission rather than rely on some unknown, unqualified, and I am bound to say arrogant, person on a forum who delights in showing off. Instead of answering the questions you often spout an excess of complicated detail rather than trying really help the poster. You may think you are king of the search engine but in reality many legal answers need knowledge of the underlying principles. With respect, as we say in the North consider winding your neck in a bit.