Inheritance Tax Question

phil_744

Can anyone help please?
My will is written that if I was to die then my house and monies are left to my four children with the proviso that my husband gets to live in the house or alternatively they have to purchase alternative accommodation for him should he wish smaller accommodation. My question is what happens with inheritance tax should he wish to stay in the house or if he decides to leave and live in smaller accommodation. The value of my property amounts to approximately £500,000.

Thank you for any advice you can give.

CLAPTON

the estate would need to pay IH tax ..next year the allowance is 300,000 so 40% of 200000 i.e. 80,000 would be payable

tigergold

When u say next yr, do u mean next tax yr , so april 2007 or next yr 2008.
Apologies if this is a slly question

CLAPTON

the inheritance tax allowance is 300,000 for the tax year 2007 - 2008 ( current year its 285,000)

Petmidget

Dealing just with the specific question and not the surrounding legal issues and family arguments these arrangement can cause, assuming your husband is not your children's father, which is implied I believe.

The IHT which would be your estate less the NRB @ 40% is either payable immediately or by instalments over 10 years (plus int @4% currently) if it relates to land or property. If the beneficiaries sell the property at a point within the 10 years the remaining IHT becomes due immediately.

So your husband moving into a smaller property would trigger immediate payment, assuming the smaller property was financed by the sale of the current one.

You may wish to consider a more savvy approach, you are currently not taking any advantage of spousal exemption. I understand that if we are talking second marriage, you may not wish your husband or indeed his family to inherit from you but wish all your estate to pass to your children. But a more tax efficient approach with same results should be possible. I would advise some legal counsel as to the structure of your will, passing some of your estate to your husband (negating IHT) but with legal proviso that he must pass it to (on death or gift at a set time) your children.

eric4walking

Petmidget wrote: »

Dealing just with the specific question and not the surrounding legal issues and family arguments these arrangement can cause, assuming your husband is not your children's father, which is implied I believe.

The IHT which would be your estate less the NRB @ 40% is either payable immediately or by instalments over 10 years (plus int @4% currently) if it relates to land or property. If the beneficiaries sell the property at a point within the 10 years the remaining IHT becomes due immediately.

So your husband moving into a smaller property would trigger immediate payment, assuming the smaller property was financed by the sale of the current one.

You may wish to consider a more savvy approach, you are currently not taking any advantage of spousal exemption. I understand that if we are talking second marriage, you may not wish your husband or indeed his family to inherit from you but wish all your estate to pass to your children. But a more tax efficient approach with same results should be possible. I would advise some legal counsel as to the structure of your will, passing some of your estate to your husband (negating IHT) but with legal proviso that he must pass it to (on death or gift at a set time) your children.

Thank you for replying. I will get in touch with my Solicitor.

exil

The obvious answer is to leave the house to the husband. It may be possible to word the will so it subsequently goes to the children, would need legal advice on that.