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

MB330

Hi, I'm after a quick bit of advice which I'm hoping someone can help with. The scenario is as follows:

Total parents estate value - £1.25m cash
Gift from parents to children (paid from an account in one of the parents names) given 1 year ago - £400k cash

At first death is IHT due as 7 years hasn't passed yet?

As the gift is given from both parents but paid out of one of the parent's accounts does the 325k nil-rate band apply rather than the 650k one for couples?

Thanks!

getmore4less

MB330 wrote: »

Hi, I'm after a quick bit of advice which I'm hoping someone can help with. The scenario is as follows:

Total parents estate value - £1.25m cash
Gift from parents to children (paid from an account in one of the parents names) given 1 year ago - £400k cash

At first death is IHT due as 7 years hasn't passed yet?

As the gift is given from both parents but paid out of one of the parent's accounts does the 325k nil-rate band apply rather than the 650k one for couples?

Thanks!

If genuine gift of £200k from each parent(and only gifts in the last 7 years).

First death £200k of the £325k nil rate band is used up leaving a 38.46% uplift to the nil rate band on second death.

No IHT on first death for the gift,

depends what happens to the rest of the estate if any IHT will be due or any more of the nil rate band is used up..

MB330

thanks getmore4less. It's a genuine gift from both parents, but what happens if, for example, it hasn't been paid from a joint account and just from one of the parents accounts and the transfer executed by only them & then they go on to be the first death?

Keep_pedalling

It should not make too much difference providing the gifting is well documented. We keep a record of all our gifts, and send an updated copy every year to the solicitor who holds our wills.

Perhaps your parents should consider providing some protection in case they both die before 7 years are up. An insurance policy to be payed to their children on second death could cover any IHT payments that could fall on the £400k gift, and providing they are relatively young should not be prohibitively expensive.

getmore4less

MB330 wrote: »

Hi, I'm after a quick bit of advice which I'm hoping someone can help with. The scenario is as follows:

Total parents estate value - £1.25m cash
Gift from parents to children (paid from an account in one of the parents names) given 1 year ago - £400k cash

At first death is IHT due as 7 years hasn't passed yet?

As the gift is given from both parents but paid out of one of the parent's accounts does the 325k nil-rate band apply rather than the 650k one for couples?

Thanks!

Picking up on this point, on first death there is only 1 nil rate band, any % unused is transferable to the uplift the second.

There is no £650k couple allowance.

CatMcc

Hi All

My dad died 14 years ago (I was 15) and left no will. He shared ownership of house in London as a tenant in common with his aunt, (my great aunt). My dad's name is still on the deeds.
At the time of his death my great aunt, scared that she would have to leave her home, made my mum (divorced from my dad) confirm that as our guardian we would not try to realise our share of the house. (We've seen a letter from my great aunt's solicitors to that effect)

My mum mentioned the above story to me and my two younger sisters and basically said that at the time she distanced herself from anything to do with the estate other than the division of the money in my dads bank account between us 3 kids (about £15,000 in total). But now that we're are all adults (aged 29,26,24) think's we need to understand/deal with the situation especially as my great aunt is 90+ and has a spell of particularly bad health.

Me and my sisters are completely flummoxed about who we need to approach in order to get advice about this situation. We don't want to change the de facto situation of my aunt living in the house, and as such are worried that if we start changing deeds etc that inheritance tax would be due and we'd be forced to sell it to pay for it.

Basically we have no idea about who we should speak to about the deeds, about the inheritance tax that might be owed and any implications of nothing being done about it in 14 years! We've looked through a lot of info but it all relates to normal inheritance scenarios.

So can anyone give us pointers as to who we should talk to i.e. solicitors, tax advisors etc? Or if you've been in a similar situation what you did or wished you'd done.

Thanks for your help!

SeniorSam

First of all, who dealt with the estate of your father when he died? Was it a member of family or a solicitor? That person should have the information.

With your parents divorced, did he leave his half of the house to your mother?

Does your great aunt live in the same house as your mother or in another house?


Inheritance tax would only apply to the estate of your mother when she dies if the value of her estate is above £325,000. Do you know the value of your mother's estate now and the house you are talking about?

Sam

CatMcc

Hi Sam

I don't know who dealt with the estate when my dad died. Given the involvement of my great aunts solicitor, I would assume her, but I'm not in a position to ask her and my mum doesn't know.

My father and my great aunt lived in the same house, my mum and I (and my sisters) lived in a different house. As he didn't have a will, am I right in the assumption that his half of the house would pass to us kids.

Cat

SeniorSam

Hi Cat,

the estate would normally pass to the next of kin and as he was divorced, and that would account for the money in his account coming to you, so that would be correct.

As your great aunt is to pass her interest in the house to you and your siblings, it sounds like the whole house would pass to you all. However, if you know the solicitor of your great aunt, it may be worth making contacting, although there is no obligation for them to reveal anything to you. However, the solicitors may be your great aunt's executors and as such they may be prepared to help.

Have you any idea what the value of the London house is? As your father and great aunt will both have a nil rate band allowance of £325,000, then inheritance tax would only apply on values above that amount each.

Sam

getmore4less

Back to basics.

Dads death, no will, divorced at the time so assets to kids.

you need to establish what happened to his estate at that time and who became the trustees for the trust(automatic as minors of an intestate estate)

The defaults should have been your mother.

it may be there was IHT due based on the nil rate band at that time(not £325k) and that was paid at the time, if not that will need sorting.
https://www.gov.uk/government/publications/rates-and-allowances-inheritance-tax-thresholds/inheritance-tax-thresholds

6 April 2001 - 5 April 2002 £242,000
6 April 2000 - 5 April 2001 £234,000


The problem may be establishing any life interest for the aunt to get round the CGT issue for yourselves(kids) as the benificiaries of your dads estate.

Don't think you mum could give this as minors a DOV would not have been possible.

Who inherits the other share of the great aunt(will or intestate) is the next part of the puzzle.

To get anywhere you will need valuations and the grant for your dads estate, the solicitors that were involved in that and the inventory/account for the estate.

AIUI, The trustees for your inheritance should have contacted you at 18
keeping the assets in a house in london was probably quite fortunate, probably outperformed most other options.