Inheritance tax advice. How does it work?

tabby1471

[FONT=Times New Roman,serif][FONT=Calibri,sans-serif]Hi[/FONT][/FONT]
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[FONT=Times New Roman,serif][FONT=Calibri,sans-serif]Unfortunately my mother passed away recently and left a substantial estate in her Will.

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[FONT=Times New Roman,serif][FONT=Calibri,sans-serif]The problem is, the Will places me as the sole beneficiary and I want to redistribute it amongst myself and my 3 children.[/FONT][/FONT]
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I currently have a company dealing with this and they gave me this advice (below in blue) and what I really need to know is, is it correct and is this the most financially effective way to distribute it the Estate?

As I thought Gifting large amounts of money would immediately be liable for Tax?

I'd appreciate any advice in lay terms. I've been to various sites and it seems so complex and confusing.

Apologies in advance if I've posted this in the wrong area
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[FONT=Times New Roman,serif][FONT=Calibri,sans-serif]“[/FONT][FONT=Arial,sans-serif]We discussed the possible Instrument of Variation (IOV). I understand that the intention is to gift ¾ of the residue to your three children equally. The advantage of having an IOV drawn up is so that the amended distribution of the residue is “read back” to the Will, so the gifts come from the estate to the new Beneficiaries, i.e. your children. [/FONT][/FONT]
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[FONT=Times New Roman,serif][FONT=Arial,sans-serif]Whilst there are no immediate benefits in terms of Inheritance Tax, an IOV would prevent your estate being inflated. Should an IOV not be prepared and you then gift monies to your children rather than have the distribution under the Residuary Estate, the gifts could be classed as potentially exempt transfers for Inheritance Tax within seven years. I can confirm this is the only taxable risk of gifting the money. [/FONT][/FONT]
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[FONT=Times New Roman,serif][FONT=Arial,sans-serif]As we are within two years of your late mother’s passing, we would recommend an IOV to vary the Beneficiaries of the estate. Of course, it is entirely your decision.” [/FONT][/FONT]
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Savvy_Sue

This is quite a good place, but as I see you've posted it in a few others I shall ask the Forum Team to sort that out for you: please see the Forum Rules. I appreciate that you're not intending to spam but that's the effect it has.

And I am sorry for your loss.

I'd suggest borrowing something like the Which Guide to Wills and Probate from the library, so that you can get your head round Inheritance Tax and Deeds of Variation - I guess it may also be called an Instrument of Variation. Without knowing more about your personal situation, it would be impossible for anyone to advise you, but basically a DoV allows you to re-write someone's will after their death. All the beneficiaries have to agree, and as there's just you that keeps it simple.

By the sound of it, that won't reduce the IHT due on your mother's estate, but it will potentially reduce what's due on your death.

I'm not asking you to post your details here, because I do think you need 'proper' advice - the kind you pay for, because that's the only kind you can rely on, as in being able to sue the pants off the person who gave it if it turns out to be wrong. But what's best for you would depend on your age, your marital situation, your other assets, your children's ages, their marital situation, and their other assets. What your mother's estate consists of could also be relevant - selling a house you haven't lived in can leave you vulnerable to Capital Gains Tax, I believe, as can selling works of art, but I am no expert here!

If you don't understand what this company are telling you, ask them to explain it until you do. Ask them to explain any other options, and what the difference is between doing what they suggest and doing nothing.

If they can't do that, go to someone else. I'd suggest finding a solicitor or accountant who specialises in this area, a member of STEP would be a good starting point.

tabby1471

Sorry for duplicating etc. I'm trying to find out where to delete posts atm.

Savvy_Sue

tabby1471 wrote: »

Sorry for duplicating etc. I'm trying to find out where to delete posts atm.

I don't think you can delete threads you've started. I think as someone has given good advice on the Cutting Tax board, that that's probably the place to be, so I can lock this thread and guide people there ... and possibly get it merged with the other one that's been answered, but then just wait for Forum Team to sort it out ...

OK, anyone with anything to add, please see here.