Inheritance Tax

kuksman

Hi
I was thinking if someone has a property valued at £450,000, sold it and spent all the money and shortly afterwards dies. Would he or his family still be liable for IHT?

[Deleted User]

Inland revenue would find out what the money was spent on. If it was spent on other people then yes there would be IHT to pay

reddevilled

kuksman wrote:

Hi
I was thinking if someone has a property valued at £450,000, sold it and spent all the money and shortly afterwards dies. Would he or his family still be liable for IHT?

Spent it on what?

I would have thought it would be very difficult to spend the 200k to bring him under the IHT threshold and have NOTHING to show for it.

If he buys something tangible then it will still be part of his estate. If he gives it to other people, and dies within 7 years it is liable. So unless he gives it all to charity or drinks it away :beer:

I don't know what you're suggesting

margaretclare

reddevilled wrote:

Spent it on what?

I would have thought it would be very difficult to spend the 200k to bring him under the IHT threshold and have NOTHING to show for it.

If he buys something tangible then it will still be part of his estate. If he gives it to other people, and dies within 7 years it is liable. So unless he gives it all to charity or drinks it away :beer:

I don't know what you're suggesting

How much does a world cruise cost? Or several world cruises, one after the other.

Suppose you just spent it on travel, visiting all those places around the world that you've read about and seen on TV. Or if you have friends and/or relatives in far-flung countries (I have half-siblings between Queensland and Florida - it's possible!) Suppose you went to all those places by first-class air travel. Or cosmetic surgery...have we got near the £450,000 yet???

Lovely thought!

Aunty Margaret

helen_vasey

Surely if a person just kept drawing out lots of cash, there is no way anyone could prove whether it had been spent or just given away? Lots of people dont keep receipts. My sister got through £40 k in 6 months and has nothing to show for it, thats why she is having lots of trouble getting housing benefit. She really doesnt know where the money has gone! (gambling, i suspect).

exil

Anyone seen the film "Brewster's Millions"? The hero is given 1 million to spend in a year, with these rules

- not to be given away ie as gifts or donations to charity
- not to be used to buy marketable assets (house, car, yacht, shares, etc)

You'd have to do something like that. Staying in a 5 star hotel for a year
would make a big hole in someone's capital.

Unfortunately for this plan the benefit people also require that you don't use your capital to enjoy an inappropriately luxurious lifestyle. The safest thing to do would be to look at Income Support rates and live at about that level ie 56 a week for a single person, 88 for a couple (excluding rent, mortgage) until the capital is used up.

You are also not, strictly speaking, allowed to
- pay off debts eg mortgage
- buy any sort of investment (well you can but it then forms part of your capital)

You're certainly allowed to buy an annuity if you're retired, not sure if this is allowed if
younger. This would, though, increase yr income and thus be taken off the benefit you eventually claim.

margaretclare

<i>Unfortunately for this plan the benefit people also require that you don't use your capital to enjoy an inappropriately luxurious lifestyle. The safest thing to do would be to look at Income Support rates and live at about that level ie 56 a week for a single person, 88 for a couple (excluding rent, mortgage) until the capital is used up.</i>

Could you work out how long it would take to use up the value of the house, living like that? £450K? To get rid of that amount, at Income Support rates, would take a very long time, I'd have thought. The 5-star hotel idea would get rid of it much quicker.

How are the benefit people involved? I thought the original question was about tax, not benefits?

Also the person would need somewhere to live in the meantime, if he wasn't allowed to live in a 5-star hotel. If he bought a smaller cheaper house that would still form part of his estate.

Oh, the headaches of being wealthy (poor Tessa Jowell and her husband, so sad, what problems they have that the rest of us escape).

Margaret Clare