A couple of Inheritance Tax questions

Kaliko

Hi,


I have a couple of questions regarding IHT. The first one should be quite straightforward (I hope); the second one is a little more specific. Any advice appreciated.




1. I have a 2nd property that I don’t need. It is held jointly in my wife & my name.

I want to pass it on to my children, and to reduce IHT I figured we would give it to them now.

Now I am aware that the gift is only IHT exempt if 7 years pass between the date of giving and the date of death. But my question is – who’s death?

If, for example, I expect my wife to live longer than me, does it make sense for me to gift my half of the property to her, then her to immediately gift it on to our children? Or does IHT only consider the death of the second spouse as the relevant date, as which the normal use of IHT bands?



2. I have some assets overseas in a foreign currency. This currency is a currency with strict exchange rate controls (hence the related income tax is charged on a remittance not an arisings basis – thus I pay no UK income tax on this at all).

Would these assets be subject to Inheritance Tax? After all their income is not subject to income tax, because the currency is non-transferrable and, quite logically, I wouldn’t be able to pay it.

So I guess, how would they expect my estate to pay IHT on foreign assets that are held in a non-transferrable currency? Note that there is no IHT in the foreign country.



Thanks

xylophone

http://www.hmrc.gov.uk/cgt/property/basics.htm re CGT on giving away second home.
With regard to "who dies first' here is a true story. A certain lady is very ill (terminal cancer) - her husband was expecting to be mourning at her graveside. The husband in question died of a sudden and overwhelming chest infection about six weeks ago - the lady is still in the land of the living.
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm#4
http://www.wiley.com/legacy/wileychi/finney_wealth_management_planning/supp/IHT_HMRC_BOOKLET_FOREIGN_ASPECTS.pdf might help - contaims HMRC contact numbers for advice.

Kaliko

xylophone wrote: »

[...] re CGT on giving away second home.

With regard to "who dies first' here is a true story. A certain lady is very ill (terminal cancer) - her husband was expecting to be mourning at her graveside. The husband in question died of a sudden and overwhelming chest infection about six weeks ago - the lady is still in the land of the living.

[...] might help - contaims HMRC contact numbers for advice.

Thanks. I contacted HMRC using the numbers you provided and they were able to help me with question 2, as that was a specific query.

However I couldn't make much headway with question 1, as I was told that was a tax planning question, and they don't deal with those. So if anyone knows the answer to that question, I'd love to hear it.

pjclar02

Hello there

This is a fairly complex area, and it would probably be worth your while appointing a professional to help you through it.

My understanding is that in these circumstances each of you will pass a 50% interest in the property to your children. Therefore, on the event of death one of you within 7 years, the tapered value of 50% of the property would become chargeable. If the other survives the 7 years, then the second half would not become chargeable.

getmore4less

pjclar02 wrote: »

Hello there

This is a fairly complex area, and it would probably be worth your while appointing a professional to help you through it.

My understanding is that in these circumstances each of you will pass a 50% interest in the property to your children. Therefore, on the event of death one of you within 7 years, the tapered value of 50% of the property would become chargeable. If the other survives the 7 years, then the second half would not become chargeable.

The 1/2 share along with other gifts in the 7 years would have to be over £325k to atract any taper relief.