Will/IHT question

monty_pylon

Hi
My father passed away last year and I am concerned about the inheritance tax that might be payable on my mother’s estate, should she die without writing a new will.
My mother inherited the whole of my Father’s Estate of 630k, mainly the house which was their main residence.
In her own right my mother owns another house (that my older brother lives in) worth £300k. Her other assets, in addition to those from my father, might be another £80k.
I am struggling to understand the transfer of IHT thresholds and it would be useful to work out the IHT that would be due on her current will. It's a mirror will of my father’s so left everything to him (clearly not now applicable), otherwise passing to the children.
To protect my brother I assume it would be better to set up a deed of trust for the solely owned house, to avoid it being sold on her death.

Yorkshireman99

monty_pylon wrote: »

Hi
My father passed away last year and I am concerned about the inheritance tax that might be payable on my mother’s estate, should she die without writing a new will.
My mother inherited the whole of my Father’s Estate of 630k, mainly the house which was their main residence.
In her own right my mother owns another house (that my older brother lives in) worth £300k. Her other assets, in addition to those from my father, might be another £80k.
I am struggling to understand the transfer of IHT thresholds and it would be useful to work out the IHT that would be due on her current will. It's a mirror will of my father’s so left everything to him (clearly not now applicable), otherwise passing to the children.
To protect my brother I assume it would be better to set up a deed of trust for the solely owned house, to avoid it being sold on her death.

The will be IHT to pay. Your mother needs urgent professional advice from an IHT specialist not an average High Street solicitor.

Keep_pedalling

As current there would be a IHT liability on £360k of the estate leaving a tax bill of £144k, so it would be perfectly possible raise that from the sale of the main property allowing your brother to remain put, without going to the trouble of sticking things in trust.

If your mother is in good health then that liability is going to reduce when the Family Home Allowance kicks in.

Yes she does need to review her will, but first off as already suggested she needs some advice from an independent financial specialist.

getmore4less

With assets of around £1million and a nil rate band likely to be £650k(asuming there were no PETS and everything went to mum) there is a significant IHT liability probably around £140k .

The new IHT house nil rate band will start to mitigate some of that as it kicks in over the next 6 years.

One way to reduce liability is to spend the money or give it away and hope you live 7 years.

The other potential issue is the second house, why does she own it if your brother lives there, depending on the circumstance there may be a CGT issue if that is disposed of during her life time unless there is some exemption(like dependancies).

THis house may be a suitable asset to offload if the intention is the brother gets to stay there anyway.

Expert advice needed and worth paying for.

SeniorSam

A your father left his estate to your mother, then both his and her nil rate band allowances are available when your mother dies. After that 40% will be charged on the residue. Not withstanding any new tax allowances.

If your mothr lives for 7 years, she can gift assets out of her estate and after 7 yeras there would be no tax on those gifts.

If she were to gift assets into Trust for the benefit of 'whoever' after her death, as long as she does not benefit from those assets for the remainder of her life, then such gifts are acceptable. She can be a Trustee and so have an element of 'holding the reigns' along with other family members.

Professional advice from an expert in this field is essential, but do first check on what planning experiance an adviser has before instructing him as they will all SAY they can do it, but he/her needs a good past record.

Sam

monty_pylon

Thanks all for your replies which are most helpful. Clearly some specialist professional advice is needed and the substantial IHT liability will help to focus my Mum's thoughts. She has an unshakable faith in the long-retained family solicitor so I still have work to do.
Just to clarify, I should have pointed out that my dad left his 50k share in another house to my other brother, that they held as tenants in common. I'm not sure if this means some of his nil rate allowance has been used.
thanks again,
monty-p

Keep_pedalling

monty_pylon wrote: »

Thanks all for your replies which are most helpful. Clearly some specialist professional advice is needed and the substantial IHT liability will help to focus my Mum's thoughts. She has an unshakable faith in the long-retained family solicitor so I still have work to do.
Just to clarify, I should have pointed out that my dad left his 50k share in another house to my other brother, that they held as tenants in common. I'm not sure if this means some of his nil rate allowance has been used.
thanks again,
monty-p

Yes it does reduce the amount of allowance that can be passed on, by £50,000 at the current rates, or 15.4% on future allowances.

SeniorSam

If the family solicitor is a S.T.E.P. qualified solicitor, then he should have the necessary expertise. If not, it's best to move or maybe not get the best advice. However, he cannot make any suggestions regarding suitable investments and where best to shelter capital although he hs knowledge of suitable Trusts.

Sam