transferring inheritance after death

kidmugsy

rosyposyjm wrote: »

So she can give £1500 to each grandchild each year. Is there any way she can give a "one off" larger gift to them? Would that have the seven year clause on it? (Or am I just making things up now)

If she hasn't made a gift in this tax year or last tax year, she can gift a total of £6k IHT-exempt, because you can carry forward the previous year's amount if it was unused. Thereafter it would be £3k p.a. which is, as you say, £1500 each.

Bigger gifts would be subject to the seven year rule, except for two exceptions I can think of off the cuff. (i) She can make gifts from surplus income i.e. surplus to her regular expenditure. She'd have to make the gifts regular (annually, or quarterly, or monthly would be the thing), and she'd have to leave documentation that demonstrated that it really was surplus income and not capital she was gifting. (ii) She can give a gift of £2500 to each "in contemplation of marriage" - but it's a bit soon for that, eh?
http://www.cdlaw.co.uk/cms/document/inheritance_tax_allowances_and_exemptions.pdf

zagfles

jamesd wrote: »

Can she afford to pay you 50% of the market rent for the house starting from then until she dies?

To avoid inheritance tax a gift must be a pure gift. If she gives you half but then wants to live in it rent free it is called "gift with reservation" and doesn't avoid inheritance tax. That's why she would be required to pay you the market rent for the part you own if the purpose was to avoid inheritance tax.

Sounds like OP was talking about getting will changed so she inherits direct from father, so it wouldn't then be a gift from mother but an inheritance direct from father.

But as per my previous post it's not likely to save IHT anyway, and there'll potentially be CGT to pay.

jamesd

Yes, that would be an useful dodge if it's practical. Eliminates the rent issue.

Not sure about CGT, I think it was probably the child's home at some point so there may be some PPR available. Still a significant potential CGT bill, though.

xylophone

With regard to the house, if it was held in joint tenancy, it would have passed to mother outside any will. No variation would be possible in this case?

If father held the house in his sole name, he could have chosen to leave the house to his daughter immediately on his death or with a life tenancy to mother.

If the house was held as tenants in common he could have left his share to his daughter with a life interest to mother.

If the house was held in sole name or as tenant in common, and he willed his interest to mother, then as I understand it, a variation would be possible within two years of death.

If father left cash/investments to mother, then presumably variation would be possible?

http://uk.practicallaw.com/4-500-3058

jamesd

That's my understanding about joint tenancy, no deed of variation possible because not governed by the will. Variation is definitely possible for cash and investments and those could be used to purchase an interest in the property.