Inheritance Tax

honey1

getmore4less wrote: »

One thing to be aware of is a DOV is still a deprivation of assets so can impact anything means tested.

You also have to be careful as some actions can result in assets getting taxed in multiple ways(IHT & CGT).

Thanks - means tested benefits do not enter the equation, either now or in relation to any future care home fees.

If dad wrote 3 cheques in our names on receipt of the ineritance from mum, the capital gain would be non-existant or negligable.

Assuming of course that my original post is correct/feasible.

G6JNS

honey1 wrote: »

Thanks - means tested benefits do not enter the equation, either now or in relation to any future care home fees.

If dad wrote 3 cheques in our names on receipt of the ineritance from mum, the capital gain would be non-existant or negligable.

Assuming of course that my original post is correct/feasible.

That may not be correct. You really do need to get paid for professional advice. You would be very unwise to proceed without it.

getmore4less

Missed this first time round

honey1 wrote: »

4) If dad then made equal gifts to each of us of the money he inherited, then provided he lived a further 3 years (or 7) the IT on that money would be reduced (or avoided).

Is my thinking correct?

I don't think you understand how that works,

taper relief only works after 3 years on gifts OVER the nil rate band and only on the bit above the nil rate band.

http://www.hmrc.gov.uk/inheritancetax/how-to-value-estate/gifts.htm

gibson1

honey1 wrote: »

My mum owns a house that will take her over the IT threshold. She also owns some savings/investments, so these will be taxed at 40% on her death. My brother, sister and I are the Beneficiaries.

1) I believe money passed to a spouse is not subject to IT, so if the savings /investments were passed to our dad, they would be exempt (at least for the time being). Is this correct?

2) I believe Beneficiaries can choose not to inherit and to direct the inheritance elsewhere. Is this correct?

3) If 1) & 2) are correct, could we, the Beneficiaries (and also Executers) agree to give the money to dad, and postpone any IT liability?

4) If dad then made equal gifts to each of us of the money he inherited, then provided he lived a further 3 years (or 7) the IT on that money would be reduced (or avoided).

Is my thinking correct?

edit: dad also owns a house so will also have IT to pay.

1) Yes, money left to a spouse is exempt from inheritance tax.

2)Yes, its called a deed of variation. If you transfer your gifts to your father, it will be regarded as coming directly from your mother to your father, and will be exempt from IHT. Also, whatever your mother did not use from her IHT tax free band would be transferred to your fathers IHT tax free band. So, if your mother left everything to your father, by her will or by 'deed of variation,' your fathers IHT tax free band would currently be at £650,000.

3) Yes, with a 'deed of variation,' drafted up and signed in front of a solicitor.

4) That's where it gets tricky. If he then gave it straight back to you it would probably be regarded by the tax man as coming from your mums estate to you and therefore subject to IHT. If he made gifts over the years? I'm not sure. I'd get professional tax planning advice on that one.

Depending on how much money is involved, and how much of your mums estate was distributed I'd consider answer 2) and use the combined IHT tax free band, if you're serious about preserving your mothers wealth.