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

troubleinparadise

Unfortunately that lack of planning on your parents' part has left this situation...

But what is done is done, try to just focus on the pleasant bonus you are getting in the form of any inheritance .

The UK has double taxation treaties with other countries, and a foreign taxation accountant will be able to advise you as to whether that applies in this case.

ice2cu

The information in the last few answers are very helpful thank you . Given that mums estate is well over the joint 650000 allowance and though large and in two countrys it weould seemt that we will lose 40% of every thing over this. Is there much a paid processional advisor would be able to do to reduce this given that apart from the two contries and the usa citizenship mum was a resident in the uk and the estate is quite simple being stocks and shares and bonds and one uk property in her name most of which apart from the USA trust we informed hmrc of 2.5 years ago when dad died

ice2cu

troubleinparadise wrote: »

Unfortunately that lack of planning on your parents' part has left this situation...

But what is done is done, try to just focus on the pleasant bonus you are getting in the form of any inheritance .

The UK has double taxation treaties with other countries, and a foreign taxation accountant will be able to advise you as to whether that applies in this case.

At times Ifeel guilty questioning this and I should be very grateful for the provisions they have made including 10 % to charity which will atleast be tax free.

The USA IHT only starts at $2000000 and doesnnot cover her UK estate so I do not think double taxwill come into it I am happy to pay fees but at this stage it just looks like there would be little point. Thanks for all the advice it is helping alot

holly_hobby

If you're trying to save money and do this DIY, then rather than follow forum advice, which should never wholly be relied upon, you need to become familiar with HMRC IHT regs - including the fact that in some cases IHT may be paid over an extended period.

I've already given the link to HMRC re basic IHT - if you start hunting around on their site you'll find everythint you require and need to understand in preparing an IHT return (or aiding the executor to do so).

Here's a few to get you started ...

http://www.hmrc.gov.uk/inheritancetax/paying-iht/who-pays.htm

http://www.hmrc.gov.uk/inheritancetax/tax-when-you-inherit.htm

http://www.hmrc.gov.uk/inheritancetax/paying-iht/payment-deadlines.htm

http://www.hmrc.gov.uk/inheritancetax/paying-iht/yearly-instalments/index.htm

Whilst the sum donated to charity is exempt, if it also meets HMRC qualifying regs ie 10% of estate (which you say she has met) AND to a recognsied charity (check with HMRC), then the IHT calc is reduced from 40% to 36% - but as I say there are strict regs (and why I presume your Mum made this donation ?) ... refer
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/charity-reduce.htm

Sure you'll be able to find anything else you need by the prompt titles within the docs I've linked you to - again I would really swing this past an IHT practitioner whom will consider the entire estate, whats exempt and is not exempt, the correct nil rate thresholds have been appied, etc, with a final computation that the correct amount of tax at the correct rate has been calculated and will be reported.

Hope this helps

Holly

ice2cu

Holly
You have been very very kind. I am not the executor that is my sister who as a solicitor is good on the legal stuff but IHT is new so the links will be very helpful
Even the charitable part will not apply as though the USA will gives 12% the UK will is a set amount that might of been 12 % when written but is now under and the total of the donations from both the USA and UKaAres under 10 % so this is unlikely to apply

Its not that i am trying to save money on fees i would happily pay if it looked like it would save so much going to the tax man. But though i have not had chance to fully read all the links i do not think we will find the get out of jail card to substantially reduce the amount paid in IHT. I think that is what i hoped to find just a glimmer of hope that we could then get a specialist to sort out. This was mums and dads call and i am trying to remember its was their money and not mine and that they did not hsve to leave anthing to me at all hence the guiltly feelings about appearing to be critical of them.

holly_hobby

Ah, so its not a full net estate 10% charitable donation thats been made.

Don't feel guilty, there is absloutely nothing wrong in trying to mitigate tax where possible, and no one would ever berate you for that.

But you need to make sure that you have ticked off all exempt assets, (and all non-exempt of course), and used the available reliefs etc where and when you are able to.

If you (and/or your sister) feel confident in going through the HMRC pages and links provided, plus any other relevant guides (and the content is not difficult to understand at all, so your sister whom is a solicitor should be able to get to grips pretty easily), then I agree that you may be able to wade through this without the aid of a probate solicitor ... indeed there may even be 1 whom works within your sister's practice whom could give a quick glance over your final figs etc.

Wish you well ..... will my sympathies for the reason and basis of your post .... sounds trite, but time really is a great healer I promise x

Holly xxx

Ted_Bloke

I see in Martin's rundown: "assets left to your spouse or registered civil partner, provided they’re UK-domiciled, are exempt from inheritance tax.".

I thought I'd heard that the archaic proviso of UK domiciliation had recently been removed. Or at least modified. Can anyone confirm this, preferably with a little chapter and verse?

holly_hobby

I suspect you're talking about the term and status of "ordinarily resident" which was abolished wef April 2013, refer the following, which discusses and I hope satisfies the chapter and verse you're seeking .... https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/179210/ordinary_residence.pdf.pdf

http://www.hmrc.gov.uk/international/remittance.htm

The term domicile remains.

In respect of IHT and HMRC regs, there is no IHT between UK domiciled (or deemed domicile) spouses or civil partners, regardless of the value of the net estate.

Domicile is relevant in respect of IHT as it determines based on residency, within which country their estate is liable for taxation (which may not necessarily be the same as where the assets are held - where double taxation treaty would also be relevant).

http://www.hmrc.gov.uk/cto/customerguide/page20.htm
http://www.hmrc.gov.uk/international/domicile.htm

Hope this helps

Holly xx

ice2cu

ice2cu wrote: »

Holly
You have been very very kind. I am not the executor that is my sister who as a solicitor is good on the legal stuff but IHT is new so the links will be very helpful
Even the charitable part will not apply as though the USA will gives 12% the UK will is a set amount that might of been 12 % when written but is now under and the total of the donations from both the USA and UKaAres under 10 % so this is unlikely to apply

Its not that i am trying to save money on fees i would happily pay if it looked like it would save so much going to the tax man. But though i have not had chance to fully read all the links i do not think we will find the get out of jail card to substantially reduce the amount paid in IHT. I think that is what i hoped to find just a glimmer of hope that we could then get a specialist to sort out. This was mums and dads call and i am trying to remember its was their money and not mine and that they did not hsve to leave anthing to me at all hence the guiltly feelings about appearing to be critical of them.

Now accepting that any real reduction must be planned well in advance. I have one hope that we are looking into a reduction some of the IHT as 50% of the estate is in USA and my brother is a New Zealand citizen so we may be able to pay his share before the UK beneficiaries before the allowances are applied

Any views and again thanks for the advice and support

Have not

holly_hobby

No, its the deceads estate that is liable for IHT (unless the will stipulates otherwise or there is insufficient capital to cover prev transferred non-exemt gifts), even a deed of variation won't deal with this, given that there is no surviving spouse to change bequests to.

Bequests are only tsfd to beneficiaries AFTER all debts have been discharged and provision for any IHT liaiblity has been set aside by the executor for payment to HMRC.

IHT liaibilty is based on the decd's domicile status, its irrelevant where any of the beneficiaries live, so your Bro living in NZ has absolutely no baring on matters.

Listen without being harsh, it seems you're missing the fundamentals, and/or haven't read the links and HMRC ref notes - either do this, or obtain independent prof advice to help with the IHT calc and return.

Here is a link to HMRC IHT basics - http://www.hmrc.gov.uk/inheritancetax/intro/basics.htm ... please familarise yourself and read the other links, and then of course come back if anything still remains unclear (which hopefully isn't the case), and/or engage a probate sol/tax adviser to assist.

Hope this helps

Holly xx