IHT planning

Loveadrink

Hi,

Wonder if anyone can help on a horrible and complex subject. My dad is due to receive an inheritance via probate in the next few weeks of around £500,000 from a relative that he wants to split this equally between myself and my brother. In the interim, we have been devastated with the news that my dad is terminally ill and only has around a year to live. He really wants to gift the money to us but wants to know how to do it whilst minimising IHT and ensuring my mum or us don't have a big tax bill on his passing.

He thinks the best way to do this, is to wait until after he passes, so everything transfers to my mum as the married partner and then my mum gifts it to us and then hopefully uses the 7 year rule from my mum to hopefully avoid paying tax on it. Mum and Dad have a house worth £200k and investments of about £250k. Is this the best way to minimise tax paid or is it to gift now jointly? Any help gratefully received.

Thanks in advance

antrobus

Deed of variation
https://www.gov.uk/alter-a-will-after-a-death

Keep_pedalling

DoV is probably the best way to go, although he can also gift the whole lot to his wife as soon as he receives the money, and she can then pass some or all of that to you and your brother, which would be tax exempt providing she survives another 7 years.

In the next financial year your mother's house would be exempt from IHT so £850 of her estate would be exempt.

Mojisola

Keep_pedalling wrote: »

DoV is probably the best way to go, although he can also gift the whole lot to his wife as soon as he receives the money, and she can then pass some or all of that to you and your brother, which would be tax exempt providing she survives another 7 years.

As a DoV doesn't carry any risks, I would go that way.

Loveadrink - your Dad should contact the executors of the estate and discuss a DoV.

SeniorSam

The Deed of Variation on the Will of the one who has died will rely on all beneficiaries of that Will being in agreement and that change taking place within two years of death. If so, then no problems and a good solicitor can do this for you. If your mather needs any financial help, then part of that could go to her. It's for you all to agree.

The gift can then go to yourself and your brother etc and will not touch your father's estate.

Good luck

Sam

Loveadrink

Thanks all. Really helpful. I will get them to looking into the deed of variation. Take care.

Mojisola

SeniorSam wrote: »

The Deed of Variation on the Will of the one who has died will rely on all beneficiaries of that Will being in agreement and that change taking place within two years of death.

This bit isn't right - it's only beneficiaries who will be affected by the change who have to agree. In this case, that's only one person, Loveadrink's Dad.

kidmugsy

DoV: to look after your mother's interest it might be best to DoV the money into a Discretionary Trust with mother and children as beneficiaries, and Mother as one of the trustees. Then if she ever needs money the Trust can lend her money, or appoint some out to her. Similarly it can lend money to the children or appoint some out to them.

getmore4less

Mojisola wrote: »

Loveadrink - your Dad should contact the executors of the estate and discuss a DoV.

DOV do not need executors to be involved unless there are tax issue related to the estate they are administering.

Mojisola

Loveadrink wrote: »

My dad is due to receive an inheritance via probate in the next few weeks of around £500,000 from a relative that he wants to split this equally between myself and my brother.

getmore4less wrote: »

DOV do not need executors to be involved unless there are tax issue related to the estate they are administering.

If the executors aren't told that a DOV is being considered, they will sent the father's inheritance to him. They need to know how to split the money and who to send it to.