Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • IronDuke
    • By IronDuke 3rd Feb 18, 8:44 AM
    • 14Posts
    • 3Thanks
    IronDuke
    Inheritance Tax
    • #1
    • 3rd Feb 18, 8:44 AM
    Inheritance Tax 3rd Feb 18 at 8:44 AM
    Hi,

    I would be grateful if anyone can clarify the IHT situation for me.

    My mum sadly died last week and although I had previously sold her home to pay for Care Home costs her sudden death means I have inherited nearly all the value of her home - £240k

    For myself and my wife this means our total assets - our home and savings combined now stand at £735k.

    As I understand it I have a IHT allowance of £325k plus £100k as I am leaving my wife everything including her half of the house and she everything to me if she dies first meaning £425k each?

    I want to pay off my daughter's mortgage which is £50k can I do so without causing any tax problems for her when we die and do "gifts" only actually apply if you already have savings and property worth more than the allowance?

    As you can see I'm confused by all this!
Page 1
    • Tom99
    • By Tom99 3rd Feb 18, 10:06 AM
    • 1,319 Posts
    • 844 Thanks
    Tom99
    • #2
    • 3rd Feb 18, 10:06 AM
    • #2
    • 3rd Feb 18, 10:06 AM
    You can do a deed of variation in relation to your inheritance, giving your daughter £50k. That way it will not touch your estate at all.
    Last edited by Tom99; 03-02-2018 at 11:06 AM.
    • antrobus
    • By antrobus 3rd Feb 18, 11:13 AM
    • 15,481 Posts
    • 22,086 Thanks
    antrobus
    • #3
    • 3rd Feb 18, 11:13 AM
    • #3
    • 3rd Feb 18, 11:13 AM
    ...As I understand it I have a IHT allowance of £325k plus £100k as I am leaving my wife everything including her half of the house and she everything to me if she dies first meaning £425k each?...
    Originally posted by IronDuke
    You have £325k each. If you die first and leave everything to your wife she will have £650k plus whatever the housing nil band is at that time.

    Potentially up to £1m I think.

    ..
    I want to pay off my daughter's mortgage which is £50k can I do so without causing any tax problems for her when we die and do "gifts" only actually apply if you already have savings and property worth more than the allowance?
    Originally posted by IronDuke
    That £50k would be a potentially exempt transfer. Where you to die within 7 years, it could be added back into your estate for IHT purposes. That won't cause your daughter any tax problems.
    • Mojisola
    • By Mojisola 3rd Feb 18, 12:01 PM
    • 28,835 Posts
    • 73,647 Thanks
    Mojisola
    • #4
    • 3rd Feb 18, 12:01 PM
    • #4
    • 3rd Feb 18, 12:01 PM
    I would be grateful if anyone can clarify the IHT situation for me.

    My mum sadly died last week and although I had previously sold her home to pay for Care Home costs her sudden death means I have inherited nearly all the value of her home - £240k

    For myself and my wife this means our total assets - our home and savings combined now stand at £735k.

    I want to pay off my daughter's mortgage which is £50k
    Originally posted by IronDuke
    You could do a deed of variation of your Mum's estate so your daughter inherits a lump sum directly from her grandmother.
    • IronDuke
    • By IronDuke 3rd Feb 18, 12:37 PM
    • 14 Posts
    • 3 Thanks
    IronDuke
    • #5
    • 3rd Feb 18, 12:37 PM
    • #5
    • 3rd Feb 18, 12:37 PM
    You could do a deed of variation of your Mum's estate so your daughter inherits a lump sum directly from her grandmother.
    Originally posted by Mojisola
    Hi.

    My mum's estate was essentially just cash as I had had to sell her home some weeks before she died to pay Care Home fees and because she had dementia and to ensure the money was protected by the FSCS it was put into three separate accounts in my name.

    Does this mean I now couldn't do as you suggest?

    I'm still baffled as to whether I'm liable for IHT at all.
    • Mojisola
    • By Mojisola 3rd Feb 18, 12:39 PM
    • 28,835 Posts
    • 73,647 Thanks
    Mojisola
    • #6
    • 3rd Feb 18, 12:39 PM
    • #6
    • 3rd Feb 18, 12:39 PM
    My mum's estate was essentially just cash as I had had to sell her home some weeks before she died to pay Care Home fees and because she had dementia and to ensure the money was protected by the FSCS it was put into three separate accounts in my name.

    Does this mean I now couldn't do as you suggest?
    Originally posted by IronDuke
    No.

    www.gov.uk/alter-a-will-after-a-death
    • IronDuke
    • By IronDuke 3rd Feb 18, 1:11 PM
    • 14 Posts
    • 3 Thanks
    IronDuke
    • #7
    • 3rd Feb 18, 1:11 PM
    • #7
    • 3rd Feb 18, 1:11 PM
    [QUOTE=Mojisola;73824782]No.

    Thanks for that assume I complete IOV2 form?
    • kidmugsy
    • By kidmugsy 3rd Feb 18, 4:06 PM
    • 10,198 Posts
    • 6,924 Thanks
    kidmugsy
    • #8
    • 3rd Feb 18, 4:06 PM
    • #8
    • 3rd Feb 18, 4:06 PM
    I complete IOV2 form?
    Originally posted by IronDuke
    The form is a guide to ensure that the IOV you write is legally sufficient to give you the outcome you want. You can write it out as a letter in pen on paper if you want, or take a pro forma off the internet. Just use IOV2 to ensure you've not omitted anything vital or included anything unnecessary.

    By the way, you'll sometimes see "Changes can be made provided all the beneficiaries agree". I understand that this is untrue. It should say "Changes can be made provided all the beneficiaries affected by the IOV agree".

    If I were IOVing a quarter of a million pounds I suspect I'd flash out £250 or whatever for a solicitor. For £50k and a very simple case; well, are you feeling confident?

    Is this any help?
    http://www.daviessolicitors.co.uk/forms_davies/Estate%20Planning%20&%20Trusts/Deed%20of%20Variation%20(Basic).pdf

    Or this?
    https://www.moneymarketing.co.uk/tony-wickenden-constructing-a-valid-deed-of-variation/

    Or lastly this?
    https://www.accountingweb.co.uk/any-answers/can-i-draw-up-a-simple-deed-of-variation-myself
    Last edited by kidmugsy; 03-02-2018 at 4:11 PM.
    Free the dunston one next time too.
    • IronDuke
    • By IronDuke 3rd Feb 18, 6:37 PM
    • 14 Posts
    • 3 Thanks
    IronDuke
    • #9
    • 3rd Feb 18, 6:37 PM
    • #9
    • 3rd Feb 18, 6:37 PM
    You have £325k each. If you die first and leave everything to your wife she will have £650k plus whatever the housing nil band is at that time.

    Potentially up to £1m I think.

    That £50k would be a potentially exempt transfer. Where you to die within 7 years, it could be added back into your estate for IHT purposes. That won't cause your daughter any tax problems.
    Originally posted by antrobus
    When you say housing nil band is that the £100k that we each get currently and which rises again next April?

    So when I die everything goes to the wife and there is no IHT payable? No matter what the value of the estate?

    And when she dies she will have already transferred my unused £325k plus the £100k (or more) nil band meaning a total figure of £855k? Way more than her estate will be worth? Is that assumption right or wrong?

    If I have got it wrong please put me right.
    • kidmugsy
    • By kidmugsy 3rd Feb 18, 6:47 PM
    • 10,198 Posts
    • 6,924 Thanks
    kidmugsy
    When you say housing nil band is that the £100k that we each get currently and which rises again next April?

    So when I die everything goes to the wife and there is no IHT payable? No matter what the value of the estate?

    And when she dies she will have already transferred my unused £325k plus the £100k (or more) nil band meaning a total figure of £855k? Way more than her estate will be worth? Is that assumption right or wrong?

    If I have got it wrong please put me right.
    Originally posted by IronDuke

    Yes. Yes. Yes. But
    2 x 325 + 2x 100 =850, which I imagine is what you meant. Darn that typo!
    Free the dunston one next time too.
    • IronDuke
    • By IronDuke 3rd Feb 18, 6:52 PM
    • 14 Posts
    • 3 Thanks
    IronDuke
    Yes. Yes. Yes. But
    2 x 325 + 2x 100 =850, which I imagine is what you meant. Darn that typo!
    Originally posted by kidmugsy
    Not a typo clearly "complex" maths is not my strong point!!!!

    So in which case I can just give my daughter £50k to pay off her mortgage without the need to worry about any IHT liability when me and the missus have gone as the
    estate will be less than that £850k?
    • getmore4less
    • By getmore4less 3rd Feb 18, 6:55 PM
    • 31,422 Posts
    • 18,826 Thanks
    getmore4less
    You are currently ok and you have in effect 7 years for the 50k to drop out of the estate.

    If you have not used the £3k allowances you could do £12k now and another £6k in april leaving £32k PET from April.

    Or just loan her the £32k and gift £6k each of the following years.

    more IHT efficient if you don't need/plan to gift more in the 7 year period.

    A diy DOV is fairly easy to get right but unless you both die and your estate grows a lot redundant.
    • Tom99
    • By Tom99 4th Feb 18, 12:25 AM
    • 1,319 Posts
    • 844 Thanks
    Tom99
    As Getmore4less says, if you decide not to go the Deed of Variation route then give your wife £25k now (completely tax fee), then you and your wife gift your daughter £25k each, say £20k each now and £5k each after April 6th.

    If you and your wife have not used last years £3k allowance, then when added to this years £3k you have £6k each for the gifts now and another £3k for the April gift

    That mean the potentially exempt transfer will only be £16k for each of you and if either of you die within 7 years that £16k will be reduce your nil rate band by £16k
    .

    Document these gifts and the fact your 3x£3k each is unused and leave a copy with your wills.
    • IronDuke
    • By IronDuke 5th Feb 18, 3:14 PM
    • 14 Posts
    • 3 Thanks
    IronDuke
    Hi,

    Thanks to everyone who responded to my query.

    I had never heard of a Deed of Variation so the responses were very helpful as
    although at this time I don't seem to be liable to IHT the future is unknown so I've decided to take out a Variation anyway to put things on a legal footing.

    As my Deed is very straightforward and simple a local solicitor has quoted £125 + vat and for that cost it's probably well worth doing.

    Thanks again.
    Last edited by IronDuke; 05-02-2018 at 3:18 PM.
    • Sea Shell
    • By Sea Shell 5th Feb 18, 3:43 PM
    • 520 Posts
    • 516 Thanks
    Sea Shell
    Is it just the one Daughter you have?
    " That pound I saved yesterday, is a pound I don't have to earn tomorrow "
    • IronDuke
    • By IronDuke 5th Feb 18, 9:53 PM
    • 14 Posts
    • 3 Thanks
    IronDuke
    Yes and two grandchildren.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

2,793Posts Today

7,107Users online

Martin's Twitter