Inheritance Tax/Joint and Single Bank Accounts

Telamori

Hi there,

My partner has a terminal illness and we want to effectively plan for inheritance tax.

Wanted to check if someone could verify the following please?

Joint bank accounts are exempt from being considered part of her estate? (Sure this is the case)

Then following on from this, therefore I would presume it would this be exempt from inheritance tax?

We have lately placed most of our monies held in jointly held accounts into my sole name so I am able to access the funds - would this constitute a 'gift' and therefore be taxed? So should we keep all monies in jointly held accounts?

We have planned for the rest of her estate, but want to make sure there is no unnecessary tax due to down to whose account our money has been placed in!

Many thanks,

T

John_Pierpoint

My sympathies for your sad and worrying situation.
But I don't think this idea is going to work!
Just because the survivor can claim the account by producing the death certificate, does not mean that the booklet of forms IHT400 can be avoided.
A sudden flurry of changes to savings accounts would be somewhat suspicious.
(Remember there is likely to be a final Income Tax return required as well as an IHT400 return if the estate is > 325K)
(Google can find you plenty of background information:
Results 1 - 10 of about 3,860 for IHT400. (0.21 seconds)
How long do you think you have?
How big is your potential tax problem. remembering that the first 325K of the total asset value is nil rated.
http://www.hmrc.gov.uk/rates/iht-thresholds.htm
When you say "partner" what do you mean? I am assuming you mean "significant other" rather than "business partner".
If you do not have a "legal union" then legalising the "partnership" would avoid the tax problem on the first death and double the potential nil rate allowance on the second?
There is a little scope for gifts left and some of the assets may qualify for IHT reliefs anyway.
You need to put numbers and details on "the estate" to trigger more constructive suggestions.

CLAPTON

There is no IHT or any other tax between marrried couples or in legal civil partnerships.

But if 'partner' means 'un-married' or not a civil partnership then the usual rules of IHT, seven years for potential exempt gifts, cgt etc apply just as if the gifts were given to an unrelated person.

The rule about joint a/cs or joint property (joint tenants) etc is that although the survivor becomes the legal owner so they can access the bank a/c or sell the house without probate probate, but for IHT purposes the tax man will want their full share. If joint a/cs have recently been opened the tax man may well take the view that this was a gift within the 7 year rule and so forms part of the estate of IHT purposes.

How much is the estate worth; is there jointly held property?
Without wanting to be intrusive at a very difficult time but marriage will solve all the financial and legal problems

John_Pierpoint

One other possible source of confusion over the size of an estate are the figures in the public domain. What is says on the "admon" - the certificate legally appointing the personal representative/executor to gather in the assets of the deceased - may well be a fraction of the total on HMRC's IHT400 return.
The largest missing taxable asset may be an interest in a trust, which could be clobbered for IHT by the death of the beneficiary.
(My late mother used to get a constant stream of letters & visitors suggesting she might like to put her 6 figure house up for sale, probably to an associate of the person making the suggestion.
I always used to think - "Why don't these idiots invest a few quid with the Land Registry, then they would know that she does not own it and so cannot sell" - not without other trustees agreement anyway).

Telamori

Hi there,

Thanks very much for all of the information and advice, and the sympathies.

In the time that has past, sadly my partner has past away. She was very peaceful.

Sorry I did not specify, we are co-habitees of 3 years; she had literally just had her divorce papers through, but unfortunately we were unable to get married within this time as we would have liked as she was too ill.

To explain a bit more about the situation; She has created a will that leaves her part of her house (currently up for sale) within a trust - the beneficiaries ultimately being her children/grandchildren with myself having a lifetime interest in the funds raised from the house. Her children are both financially independent and over 18 and have already recently received a substantial inheritance which my partner forwent from her father (she asked him to leave it to them, she did not pass it on as a gift). Her half of the house (co-owned with her ex-husband - severance of tenancy served and registered with the Land Registry) is worth around £350,000.

As far as I understand from the way the trust is set up though, it should be out of reach from IHT (fingers crossed). Her residue estate, to be distributed between myself and her two children, including death grant from her pensions is around £75,000, so I guess this means we should be out of IHT territory if the trust is as it has been explained.

The lump sum which was paid into our joint accounts was close to £50K, which was for her ill health retirement of which I am in 'survivorship' of. If all the above is the case, I hope we should be ok... Does it sound that way - or is there anything else I should be aware of?

Again, your help, advice and sympathy has been of great help already.

Many thanks,

T

John_Pierpoint

You need to let us have the figures if we are to make sensible observations about the possible/probable outcomes.

Alternatively, you could phone HMRC's helpline and ask for a copy of both forms & notes for IHT400 & IHT205
Say it is not clear at this stage which form you will need and you might get quizzed on which IHT4xx schedule forms you need. Just ask for the "common" ones and say you will download any others from the web.
(IHT205 is the "easy" one for "simple" estates less than 325K or less than 1,000,000 where everything over the nil rate band has been left to an exempt beneficiary: legal partner - political party - charity etc.)
You will then have an insight into what a complex nightmare the whole thing has become.

Just a "Google" of those two references would keep you in reading matter for days.