Inheritance Tax and dependants

Jabamusic

Hello.

I have read many threads on this subject as well as the advice and guidance Martin offers through his specific article on the subject, however my particular query isn't especially covered. So here goes, and anybody's help on this would be valued..........

Situation is that my mother ("M") lives with her sister ("S"). "M" owns the house and wishes to leave the asset to son and daughter. The property value would (at todays prices) leave an IHT liability of about £40k. "M" is keen to make provision that would allow "S" to remain in the property if "M" pre-deceases her.
My question relates to dependants living on in the property that has become an Estate following death. ? Can IHT be put off/deferred in any circumstance ie until for example "S's" death as she may well have lived there for 25+ years by that time?
Nobody would want to have to sell the property from under "S's" feet to pay IHT, but with a bill that could top £50k I am anxious to do everything to avoid that.

Thank you for your thoughts.

Jaba

CLAPTON

no, there is no provision for deferrring the IH tax until 'S' dies.

depending upon 'M' age (i.e. if she is fairly young ) she may be able to get insurance but obviously it would be expensive,

or the children could consider mortgaging the property should the event happen on an interest only mortgage for 50k if they could afford this. (i'm asssuming the 'M' will be leaving no actual cash).. this would cost about 2,500 to 3,000 per annum

RayWolfe

Yes it can be defered for up to 10 years but interest will have to be paid.

Petmidget

Yes, the IHT liability would arise immediately but can be spread (not deferred) over 10 years with interest payable currently at 4% (but that might rise on Wednesday).

The alternative would be remortgage or term life policy as mentioned.

Alternative assuming S has no additional relatives to which she may wish to leave the property to is; For M to gift a portion of the property to S, enough to maintain the remaining estate under Nil rate band (say 25%but historically the longer time until first death the more difficult it will be to hold it under NRB). The first to pass away then passes their portion to the eventual heirs and the balance at second death. 2 inheritances both likley to be under IHT threshold.

There is potential issues with CGT and POAT and you should seek professional advice if this is a route you decide to explore.

Jabamusic

Thanks to all those who replied. I wasn't aware that there was a deferral process (albeit an expensive one).

Some planning to do I think.

Jaba

tanith

The IHT threshold just went up in the budget to £350.000 by 2010