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

lazza1973

Sam

Thanks
Partly Aare of what you say on taxation and aware I do not KNOW enough - i am pursuing advice i that area and I may be using wrong language until i get it. But intending to get the clarity on the roles and what it means/implications before acting.

House is above the single person 'residential allowance' in 2020 i.e. £230k ish when i understand the allowance starts at 2017 at £100k rising to £175k in 2020.

kidmugsy

lazza1973 wrote: »

1. I am single and have an Estate in £800-900k and even with the new Residence Allowance so £300-400k ‘possible’ for IHT in 2020.

I am looking to create a Discretionary Trust with ‘around £300k’ in it to; to avoid some Tax challenges which arise when we get over the £325k. So overall there will some of the Estate still subject to IHT but will be relatively small and I may yet address thorough the small gifts/weddings etc .

(i) The residence allowance is no use to you unless you leave the house to your children (defined to include step-children, foster children and adopted children), or their children, etc.

(ii) Putting a slug of money into a trust doesn't protect it all from IHT unless you then live for 7 years. A trust is just a destination for a gift, it doesn't have magic anti-IHT abilities.

SeniorSam

Hi Larry, you have not answered the question about the net value of your house now. What you gave was this -
House is above the single person 'residential allowance' in 2020 i.e. £230k ish when i understand the allowance starts at 2017 at £100k rising to £175k in 2020.

That is assuming that property values will rise, when it is not a certainty, but it seems to be that if your net worth now is £800-900, then your idea was to gift almost all your assets, excluding your house, into Trust.

That would certainly look very suspicious to the Revenue and as I said, I think you need to think again and do a lot more research on this subject so that you can understand more than you do.

However, there are ways that you can gift into Trust and 'effectively' not have to wait 7 years for the value of that gift to be exempt from the value of your estate.

Sam

MrGumby

A married couple own a house as 50/50 tenants in common. First partner dies when house is worth £400K, their share is therefore 200K. When the second partner dies, the house is worth £500K.

What amount is counted for probate/IHT? £250K or £300K?

Sorry if this has been covered but I can't find it.

Keep_pedalling

MrGumby wrote: »

A married couple own a house as 50/50 tenants in common. First partner dies when house is worth £400K, their share is therefore 200K. When the second partner dies, the house is worth £500K.

What amount is counted for probate/IHT? £250K or £300K?

Sorry if this has been covered but I can't find it.

Assuming the first partner left everything to their widow / widower then for for probate purposes it would be £200k but IHT does not come into it as all that happens is that their nil rate allowance is passed to the surviving spouse with any IHT due falling on the second estate.

On the second death £500k will need to be declared but this is well below the £650k nil rate band that will apply to the second estate.

stanleyo

I have purchased a property (over 450k) as joint tenants with my daughter. In the event that I pass away, would my daughter be outside the purview of the IHT regime i.e. not taxable - I have assumed this is the case as we both own the property completely. Is this correct?

Are there factors such as who paid the mortgage deposit, who serviced the mortgage etc which are looked at in determining IHT liability?

Thanks for your help.

getmore4less

stanleyo wrote: »

I have purchased a property (over 450k) as joint tenants with my daughter. In the event that I pass away, would my daughter be outside the purview of the IHT regime i.e. not taxable - I have assumed this is the case as we both own the property completely. Is this correct?

Are there factors such as who paid the mortgage deposit, who serviced the mortgage etc which are looked at in determining IHT liability?

Thanks for your help.

when you die 1/2 the value of the house is included in your estate for IHT purposes. any debt offset would also be 1/2 that debt. leaving a net amount to be included in the IHT assesment.

If there is a joint mortgage then the daughter become liable for all the debt.


Joint assest are still assesable for IHT they just don't form part of the distibutable estate.

getmore4less

MrGumby wrote: »

A married couple own a house as 50/50 tenants in common. First partner dies when house is worth £400K, their share is therefore 200K. When the second partner dies, the house is worth £500K.

What amount is counted for probate/IHT? £250K or £300K?

Sorry if this has been covered but I can't find it.

there are multiple senarios and two deaths.

First death £200k but depending what happens to that 1/2 it changes things does the spouse keep it or does it go to someone else or into trust.

it Could be £250k or £500k (no idea where you get £300k from)

MrGumby

getmore4less wrote: »

there are multiple senarios and two deaths.

First death £200k but depending what happens to that 1/2 it changes things does the spouse keep it or does it go to someone else or into trust.

it Could be £250k or £500k (no idea where you get £300k from)

Thank you. £300K is the difference between the value of the house at time of second death (£500K) and the £200K that was 50% of the value of the house (£400K) at time of first death. First death was my mother and her IHT allowance passed to my father.

Her estate was valued at £282K including £200K for the house. My father's estate will be around £150K plus whatever has to be counted for the value of the house.

My question is, will the house value be counted as 300K (500K-200K) or 250K (half the current £500K value)?

MrGumby

Keep_pedalling wrote: »

Assuming the first partner left everything to their widow / widower then for for probate purposes it would be £200k but IHT does not come into it as all that happens is that their nil rate allowance is passed to the surviving spouse with any IHT due falling on the second estate.

On the second death £500k will need to be declared but this is well below the £650k nil rate band that will apply to the second estate.

Thank you. So, on second death, £500K (full value of house) has to be declared, even though £200K (50% of the value of the house at the time) was part of the £282K estate declared on first death?

Although £500K is of course less than £650K, with other assets the total will be more than £650K.