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

opeterson

Mojisola Thanks I really appreciate your input, I will check his will but i don't think there are any specifics

mumm1e

Hello Harry,
I'm new to this forum and am hoping to glean information about IHT planning. I have been reading your posts and finding it all very complex though hoping things will become clearer if I persevere. We had always assumed that the simplest course would be to unload property onto our children once they reached 18. Our first son was diagnosed with autism at 5, by the time he was 7 we realised that though high functioning he would probably have difficulty earning enough for secure pleasant housing in future so we started a buy-to-let one bed house. He is now 18 and we could theoretically transfer it to his name but fear the tax implications. There is about 75k owing on it and 75k equity. We would have to continue to pay the mortgage as our son has no income but it can continue to be let until he is ready to leave home. Would he have to pay CGT?
Any advice appreciated!

CLAPTON

mumm1e wrote: »

Hello Harry,
I'm new to this forum and am hoping to glean information about IHT planning. I have been reading your posts and finding it all very complex though hoping things will become clearer if I persevere. We had always assumed that the simplest course would be to unload property onto our children once they reached 18. Our first son was diagnosed with autism at 5, by the time he was 7 we realised that though high functioning he would probably have difficulty earning enough for secure pleasant housing in future so we started a buy-to-let one bed house. He is now 18 and we could theoretically transfer it to his name but fear the tax implications. There is about 75k owing on it and 75k equity. We would have to continue to pay the mortgage as our son has no income but it can continue to be let until he is ready to leave home. Would he have to pay CGT?
Any advice appreciated!

I assume you have one home that you live in and a second property that you let out.


If the second property is mortgaged then you can't give it to anyone as the mortgage company has first charge on the property.

When/if the second property is 'disposed of' (i.e. sold, given away) then you will be liable to cgt depending upon the details.

ice2cu

Hi
Hoping that the collective can offer some advice or point me in the right direction

My mother has passed away and was a USA citizen though a UK resident for 50 years and has paid UK tax on her UK assets me and my sisters are uk citizens though one lives in and is a new zealand citizen
Mums UK assets are well over the iht threshold we we will pay iht on it with out question. However she has left a trust in her name in the USA the is no iht due in the USA and the sole executor in the USA has written to me and my sisters with the amount due to each of us when the trust is wound up from the sale of the usa shares and cash in the trust account . This adds up to several $100,000 as this is in the USA in dollars which will be sent over to each of us. The help I am after is do we have to declare this for the English iht is there English iht due on it or not. I am sure you can see this will make a big differenceto us if we do nnot haveto pay iht on the USA money not sure if it helps butwhen we bought money over to pay for her care she had to payuUKtax on it as income

Grateful for for any help or pointing in the right direction
Many thanks

holly_hobby

Yes, as she was UK domiciled it doesn't matter where her assets are located, they form part of her estate and subject to UK tax regs.

Have a read through ... http://www.hmrc.gov.uk/cto/customerguide/page20.htm#7

Hope this helps

Holly

ice2cu

Thanks but I am sure you will understand its not what what i hoped to hear do you think that it makes any difference that mum left a UK will and a separate USA Will.

holly_hobby

No.

Its her place of domicile that dictates tax, not where she has a will stored or assets held, have a read through the HMRC notes I've posted.

But a snipit is ..

"Liability to UK inheritance tax depends on your domicile at the time you make the transfer.

....

You are domiciled in the jurisdiction where you intend to live permanently or indefinitely. Domicile is different from nationality or residence.

You can only have one domicile at any given time."

Have a read through the rest of the notes for clairty.

Furthermore it may be worth mentioning, that the executor is responsible for reporting the assets and delcaring and paying any tax - this is due on the value of her net estate.

Current IHT nil rate exemption is 325k per person.

Additionally, if she has a deceased UK (or domiciled) spouse which I asssume she may have if she's been her 50 yrs, whom died with their full nil rate exemption in place, this can be added to her allowance, when then means that her net estate will not incur IHT until it exceeds 650k (ie 2 x 325k) - application for transfer is by the executor to HMRC.

If there is a deceased spouse whom had made non-exempt gifts at the time of their death, then it will be a % of 325k that may be added to mums estate (again application by the executor to HMRC).

Her estate will then be taxed on the residual over the qualifying and available nil rate exemption.

Hope this helps

Holly

PS - here's a link re spousal transfer if relevant and it helps - http://www.hmrc.gov.uk/inheritancetax/intro/transfer-threshold.htm

ice2cu

Thanks we have allowed for dads allowance my hopes had been rsaised when I picked this up from the BBC web page (below) but now see that the person lived abroad not just that the money was abroad like most people just upset at how much money will be lost

Inheritance tax
Q2. I have received some money as an inheritance following the death of a relative who lived in Austria. Estate duty has been levied by the Austrian authorities on this inheritance. What taxes on this money would I be liable for in the UK? Orlando,

There are no taxes on bringing money into the UK - no accession taxes or inheritance tax. If you invest it and it generates income, that is of course liable to tax. And if you give the money away, that would be within the inheritance tax net.

If the inheritance was in other assets which you liquidated to provide cash to bring back to the UK there may well be a capital gains tax (CGT) issue.

holly_hobby

Yes, also forgot to mention that if there are US death duties/taxes on the assets held there, refer to the DTC section on the link I've already provided.

You may wish to obtain some professional advice if the estate is large and there are added overseas complications thrown in.

Hope this helps

Holly

ice2cu

The amount is below the USA iht allowance which is two million dollars. Its just the UK side as we are looking at over 200,000 i in iht I would use professional services and happy to pay if there was a chance to reduce it but from the little I know and with all your help it looks like the there is not a lot we can do. We knew this was coming but my parents were reluctant to do plan.