Hypothetical Inheritance Tax question

Pheath20

Just a hypothetical question....

Myself and brother will definitely be liable for IHT at some point in the future. If we choose to pay it over 10yrs as annual installments (with interest) rather than as one lump sum and then at some point during the 10yr period the laws on IHT change and it's abolished eg. say after the 4th yr - do you think we'd still be legally bound to pay it for the full 10yrs?

dzug1

100% certainly, yes.

The tax is due within 6 months of death, and the date of death determines what's payable if there are changes.

In a sense you are 'borrowing' the money to pay it, and that debt has to be repaid just the same as if you had actually borrowed the money from a bank.

zygurat789

Pheath20 wrote: »

Just a hypothetical question....

Myself and brother will definitely be liable for IHT at some point in the future. If we choose to pay it over 10yrs as annual installments (with interest) rather than as one lump sum and then at some point during the 10yr period the laws on IHT change and it's abolished eg. say after the 4th yr - do you think we'd still be legally bound to pay it for the full 10yrs?

You will never have an IHT liability and you would be unable to pay it if you had because you would be dead.
Your estate, or the residue of your estate, may have an inheritance tax liability and your estate will have to pay it.

harryhound

I think the "easy" payments only refer to real estate.

troubleinparadise

Pheath20 wrote: »

Just a hypothetical question....

Myself and brother will definitely be liable for IHT at some point in the future. If we choose to pay it over 10yrs as annual installments (with interest) rather than as one lump sum and then at some point during the 10yr period the laws on IHT change and it's abolished eg. say after the 4th yr - do you think we'd still be legally bound to pay it for the full 10yrs?

Are you asking as the future executors of a deceased estate?

The estate is liable for IHT, and the executor(s) has to ensure it is paid - you and your brother are not liable yourselves.

If you know the estate will exceed the IHT threshold, can there not be arrangements made now which will mitigate the amount of IHT payable?

Pheath20

Thanks all for responses.
Yes, myself and my brother would be executors and beneficiaries of a deceased's estate.
Unfortunately it's a little late now to make arrangements to mitigate much of IHT liability.
The only way we could really pay the IHT bill that will be coming our way if we decided to pay it as one lump sum within 6 months would be to sell the house. However if we don't want to sell the house and rather live in it, had heard you could alternatively pay it over 10yrs in yearly installments with interest so had just wondered if we decided to do this and Inheritance Tax was miraculously abolished during the 10yr period whether we'd still have to keep up yearly payments? I think dzug1 makes it clear what the answer to that is, not an answer i wanted to hear but best to know now!

John_Pierpoint

HMRC could well put "a legal charge" on the property to make sure you and any future mortgagee know that there is a debt secured against it.

A marriage is the only "death bed" way of avoiding IHT that occurs to me. I wonder if that would be caught by the catch all provision against actions performed where the only rationalisation is to save tax?

https://forums.moneysavingexpert.com/discussion/comment/63662989#Comment_63662989

System

John_Pierpoint wrote: »

the catch all provision against actions performed where the only rationalisation is to save tax?

https://forums.moneysavingexpert.com/discussion/comment/63662989#Comment_63662989

Or to make an honest woman of her?

agrinnall

Although of course of what dzug1 says is correct, and I've no reason to think otherwise, then if IHT rates increase during the 10 years you'll still be paying at the original rate. And I think that's a far more likely scenario than IHT being abolished completely.

uknick

OP, why do you think you will have to pay IHT?

I assume from your post this is not imminent, i.e. the person whose estate it is has not yet passed away, therefore, why not look at the various ways of legally avoiding IHT?

Pheath20

My father is in a care home seriously ill and my mother is of advancing yrs and also not in great health so 7 yr gift isn't really an option. The house is in London in a good location and will definitely mean that my brother and I will need to pay IHT when assets calculated. However I've huge sentimental attachment to the house and area and didn't necessarily want to sell it immmediately after the 2nd parent passes to raise the cash to pay the IHT bill but interest on annual payments for IHT is 3% if we were to spread it over 10yrs is v high. Even though it's still a bit premature just thinking of future options really.