Adivce please

agrinnall

Savvy_Sue wrote: »

I could be wrong, but I suspect the OP is less concerned about IHT than about the possibility of not being able to pass the house on as an inheritance / being required to pay for any care home fees should either parent require it.

Agreed that that's probably what the OP should be more concerned about, but he's the one who raised IHT in the fist place so I was attempting to clarify whether that is an issue at all.

zygurat789

Savvy_Sue wrote: »

I could be wrong, but I suspect the OP is less concerned about IHT than about the possibility of not being able to pass the house on as an inheritance / being required to pay for any care home fees should either parent require it.

And ignoring that the 25% of the house will be a chargeable asset in the children's hands so they will have to pay capital gains tax, if due, on the disposal. This may be reduced by gifting to the children and their spouces.

monkeyspanner

billyolly wrote: »

My wife and i have just turned 60 We would like to alter our will giving our 2 children 25% each and we own the other.If either on of us passes away the other gets to stay in the house. I understand that to avoid inheritance tax we have to live for 7 years after making the will.Any advice would be helpful.

I think you will find that because you would continue to enjoy living in 100% of the house that your gifts for the purposes of IHT will be considered a "gift with reservation" and would not qualify as a gift under the PET (potentially exempt transfer) IHT rules. You may be able to get the gift allowed if you pay a comercial rent on the gifted part of the house. Here is the relevant HMRC page.

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/pass-home-to-children.htm#2

John_Pierpoint

billyolly wrote: »

My wife and i have just turned 60 We would like to alter our will giving our 2 children 25% each and we own the other.If either on of us passes away the other gets to stay in the house. I understand that to avoid inheritance tax we have to live for 7 years after making the will.Any advice would be helpful.

I am a little bit confused by you posting, presumably you mean wills ?

Are you saying that each will should leave 50% to be split between 2 children, ie they will own 25% of their parents total wealth at the first death? (assuming the wealth is split evenly between the two parents).

This is similar to the default situation imposed when someone dies intestate, having failed to make a valid will.

[First £250,000 to the surviving spouse then a life interest in half the remainder, with the children getting the other half absolutely.

http://www.lancasterwillsandtrusts.co.uk/The-Rules-of-Intestacy%28872335%29.htm

My father pulled this trick by dying without a will and he owned 100% of the family home.]

Obviously we cannot comment in detail without having the figures, but the £325,000 of inheritance tax free wealth that can be passed down the generations, does not look like being changed any time this side of a general election. We also know nothing of the health of the two parents and so the life expectancy of each.

I would suggest leaving 50% of the house to the surviving spouse as a life interest, with that 50% being split between the children (grand children?) on the second death.. This is technically called "an interest in possession trust". It protects half the family home against claims or possible "folly" by the survivor but still counts as leaving that value and probably part of the £325k nil rate transferable band free of all InHeritance Tax (IHT) to the surviving spouse.

[Psychologically the surviving spouse might resent having to discuss plans with the executor/trustees/children but nobody every gets more than an life interest in anything, even though some people seem to think they will live for ever and eventually take it with them, when they go].