Inheritance Tax

mary

I'm new to this site, so hope I'm in the right section.
My husband and I jointly own our house worth approx £250,000. Recently my parents died and I am now the soler owner of their house too, worth approx £200,000. In addition I now have approx £60,000 cash/savings. I now let my parents' former house and receive a rental of £750 per month, when occupied. As we have six children (age 8 - 26) I have never returned to work and have stayed home to look after them. As a result I do not have a pension of any sort and regard my parents' house as my pension for the future. Incidentally I am 54 and my husband 57.

My concern is that, as my husband is of a different culture and nationality, the thought of making a will seems alien to his way of thinking! I am concerned about the implications of the tax man one day claiming a fair chunk of the wealth before our children can benefit if he/we do not make a will. My parents would have preferred that their savings over the years would pass to me and then on to the grandchildren.

1. If my husband doesn't make a will, how do I stand?

2. Would we better off dividing our marital home into owners in common?

3. Am I correct in thinking that my husband's half would pass down to the children ?

4. My husband has no savings at all and I would appear to be the wealthier of the two of us on paper. How does my "estate" fare (i.e. half of the marital home plus my parent's house plus savings) if I died first?

I'd welcome any suggestions on making appropriate provision in wills for this particular case and equally importantly on limiting the tax man's coffers.

Fran

You could get advice about this from your local Citizens Advice Bureau - they have information such as this. Of course you might get some good advice on this board too!

Savvy_Sue

I'm sure there's no reason why you can't make a will, even if he doesn't want to. Hope that doesn't cause marital disharmony, but it would seem to be very important if you want what your parents left you to directly benefit your children. If either of you dies intestate (without a will) then there are rules about where the money goes and in what shares, and I believe a fair chunk goes to surviving spouse. Someone out there will be better informed than I about exactly what those rules are!

Thorpeedo

I'm sure there's no reason why you can't make a will, even if he doesn't want to. Hope that doesn't cause marital disharmony

You could lodge the will so that he only find's out if you die first, no disharmony there!

System

??? I saw a tax adviser yesterday who said that my IHT discretionary trust Will was useless!!! Basically, my wife and I are joint owners of our house which is no use for an IHT, 'discretrionary trust' Will. We should have 'severed the tenancy' then made an IHT Will. Does anyone understand the mechanics of this?. Was the tax adviser correct??? Can I sue the solicitor (or at least get an amended Will for nothing!!) if the tax adviser was correct?? Help!!

Rafter

Pauls idea of passing the second property down to your children is one solution, but if the second home is also your retirement fund that is a problem if it doesn't belong to you.

If you or your husband die intestate (without a will) the estate would pass to the surviving spouse, without any inheritance tax being payable.

If both of you were to die, the estate would pass to your children and from what you say there would be a fairly large inheritance tax bill. You could insure against this if you are really worried.

A second property is not a true pension fund, and you may have to pay capital gains tax on it when you come to sell it in the future.

If you have no mortgage on either property I would suggest that you have a lot of your joint wealth in property and you might want to diversify a bit, sell the second property and invest it in a pension fund ready for when you retire. You may think that property will give you a better return than shares or other investments though.

Robert_Sterling_3

I think that the above post may be inaccurate.

If the husband dies intestate it is not the case that his assets pass to his wife.  On the contrary there are clear rules about what the wife gets and does not get.
I won't go into them here other than to say that the wife gets someting and a life interest in half of the remainder. The rest is put in trust for the children unless I am mistaken.

dunstonh

I think that the above post may be inaccurate.

If the husband dies intestate it is not the case that his assets pass to his wife.  On the contrary there are clear rules about what the wife gets and does not get.
I won't go into them here other than to say that the wife gets someting and a life interest in half of the remainder. The rest is put in trust for the children unless I am mistaken.

You are correct that it is not fully transferrable to the wife where there are living children and parents.

Robert_Sterling_3

If both of you were to die,  the estate would pass to your children and from what you say there would be a fairly large inheritance tax bill.   You could insure against this if you are really worried.

Am I being a bit short sighted here.
I have never really seen much to be gained by insuring against Inheritance Tax.
The insurance companies have to take in more  than they pay out.
So the people taking out the insurance get less back than they put in.
???

klondyke

Am I being a bit short sighted here.
I have never really seen much to be gained by insuring against Inheritance Tax.
The insurance companies have to take in more than they pay out.
So the people taking out the insurance get less back than they put in.

The idea, as I understand it, is to estimate IHT liability, and insure for that amount on death: or term assurance for 7 years for potentially exempt transfers - or, indeed, any useful lump sum which can be placed outside the estate, ready to pay IHT when due - as it will be due BEFORE probate is granted, so avoids selling off the family home etc. Also the assured person can pay the premiums as a gift to the potential beneficiaries, usually well within annual IHT allowance, thus reducing estate a bit further.

Better, though, to avoid IHT altogether ;D

Robert_Sterling_3

I can see the point of insuring the PETs.
But as insurance companies make a profit and also have to pay the overheads in connection with the policies it seems to follow that peopl ( taken as a whole ) will pay more in premiums than they save in IHT.