Inheritance Tax: Save £100,000s with simple advanced planning Article Discussion

Mojisola

jackhan wrote: »

My mother has just sold her house for around £165k and she is planning to share the proceeds of the sale thus: £40k each to myself and my brother and £15k each to 3 grandchildren. Am I right in assuming there are no tax issues ahead of us? I've done some research and concluded it's too clear cut to be true.

No tax maybe but have you researched "deprivation of capital"?

getmore4less

jackhan wrote: »

My mother has just sold her house for around £165k and she is planning to share the proceeds of the sale thus: £40k each to myself and my brother and £15k each to 3 grandchildren. Am I right in assuming there are no tax issues ahead of us? I've done some research and concluded it's too clear cut to be true. Thank you in lieu of legal advice.

Depends on the context of other gifts, total estate and survival(7 year window).

In isolation

there is no immediate tax on gifts.
In rare curcumstances IHT can be due but unlikely here.

there is also the potential issue of deprivation of assets.

hope_always

I am trying to obtain iht information.My wife has a terminal illness and as I understand that on her passing her iht nil band is passed to me which will increase my nil band to £650.000.Is this correct.My concerns are for after my days as I have two sons who I would like to benefit from our estate.If my estate was less than the £650.000 and divided equally to them would there be any iht implications for them.Has anyone been in this position.

Mojisola

hope_always wrote: »

I am trying to obtain iht information.My wife has a terminal illness and as I understand that on her passing her iht nil band is passed to me which will increase my nil band to £650.000.Is this correct.

My concerns are for after my days as I have two sons who I would like to benefit from our estate.If my estate was less than the £650.000 and divided equally to them would there be any iht implications for them.Has anyone been in this position.

Sorry for what you're going through - very difficult times.

If your estate is below £650,000, there won't be any IHT to pay.

hope_always

Thank you thats much appreciated

John_Pierpoint

Technically you her £325,000 nil rate band for Inheritance less whatever she leave to someone who is not her spouse. What you actually get is that percentage of a nil rate band she has not used; currently two £325,000 on your death would be £650,000.

The nil rat band might be increased before you die, so your share of the inherited nil rate band would increase pro rata.

hope_always

Thats useful to know thank you.

hamski

My mother passed away a couple of weeks ago and I am begining the probate process.As far as I can understand I will need to fill in forms IHT400 ,schedules 402,405,407 and 409 along with form PA1.I would appreciate any advice regarding the details.
My father died in 2009 leaving all to my mother (house and monies) except for £1000 each to 3 daughter in laws and 6 grandchildren,as far as I understand this means I have to fill in form IHT400 etc. Before he died my Father started a claim for mesethelioma in which he was successful but unfortunateley died before the award was made.My mother wanted her three children to share this except for a small amount for her (£2000) plus his ISA whch came to approx £150,000.The estates value now is approx £250,000 .I will be declaring the £150,000 as gifts made within 7 years of my mothers death. I am claiming the unused nil band rate to cover the total amount of £400,000 , is this the correct way to do this and are there any tax implications .
As for the schedules IHT 405,407 and 409,are they required when a small company pension of £50 per month was paid and the life insurance pays out under £100 pounds.I have already read that valuing the contents of furnishings need only require a nominal amount (£500) unless of high value is this correct.
I hope this is not too long winded just wanted to ask all I could think of in one post. Many Thanks original post is here https://forums.moneysavingexpert.com/discussion/4509129

John_Pierpoint

I hate to say this but I cannot understand your posting.

You need to break things down into a list, perhaps historically:

2009 January: Dad died in England & Wales
250,000 Total net value (after debts & funeral expenses) of estate
......................200,000 50% house
....................... 10,000 personal property ..
........................30,000 savings & investments
........................10,000 insurance policy not written in trust.

250,000 Distributed
..................9,000 specific bequests to 9 beneficiaries
..............241,000 balance to widow.

2013 March: Mum died in England & Wales
691,000 Total net value after debts & funeral expenses) of estate
....................400,000 100% of house
......................20,000 personal property
......................61,000 savings & investments (includes dad's insurance)
......................10,000 insurance policy not written in trust
....................200,000 compensation by trustees of cancer settlement

325,000 inheritance nil rate band
316,000 inherited nil rate band
50,000 taxable @ 40%
20,000 tax owing within 6 months of death.

OK before everyone wades and says this is garbage - I know it is. For a start the first 3,000 of gifts made each year by the widow are tax free, and when real estate is involved, payments can be made by instalments.

As you have not given the totals involved, this could well be an estate where you have to jump through the IHT400 hoops and end up paying no tax.

With the benefit of 20:20 hindsight dad could have given away those gifts outside of his will, with a little planning.

I normally recommend the "Which?" books as a suitable hand holding checklist for probate BUT the latest versions no longer go through the HMRC forms page by page.
Probably becuase they are now so complex and get changed leaving "Which?" with books fit for pulping.

The forms are pretty self explanatory and back in 2009 I needed 402 405 406 407 409 410 411 419 to be summarised into the 400. and I managed to do the debts incorrectly.

Don't forget to settle up with the Income Tax man first, even though mum died near the end of the tax year, you might discover, as I did, an appalling mess.

Good luck with the detailed form for the personal possessions - even if you have to pay a house clearance firm to get rid of most of it - I would think a bald £500 would look suspicious and uncooperative.
Then you will have "fun" when the house gets valued.

Just fill in the forms however trivial and do you best to make life easy for the poor devil who has to process them.



http://www.hmrc.gov.uk/inheritancetax/iht-probate-forms/excepted-estates.htm#1

For deaths on or after 6 April 2010 an estate will also be an excepted estate if both of the following apply:

• the value of the estate is less than twice the Inheritance Tax threshold (£650,000 in 2012-13 tax year)
• 100 per cent of the unused Inheritance Tax threshold from a late spouse or civil partner can be transferred to the deceased - find out more by following the first link below

hamski

Thanks for your response John I agree when I look at your post compared to my post it is a bit garbled , just one question will capital gains tax be payable on the £150,000 compensation payment gifted to her 3 sons.
Thanks