Reducing Inheritance Tax

Jon12345

My parents have a property worth about £600K and maybe £50K in savings in the bank.

What is the best way to avoid paying Inheritance Tax? Is it to have them leave me half the estate when one dies and then the other half when the other dies?

Thanks,

Jon

Bluebirdman_of_Alcathays

The very best way is to give it to you now and make sure they live seven years.

CLAPTON

Jon12345 wrote: »

My parents have a property worth about £600K and maybe £50K in savings in the bank.

What is the best way to avoid paying Inheritance Tax? Is it to have them leave me half the estate when one dies and then the other half when the other dies?

Thanks,

Jon

IHT starts at 325,000 per person

and the allowance is 'transferrable

so assuming each parent leaves all their assets to their spouse then on second death there will be no IHT on 650,000

from 2017 there is a larger IHT allowance for property
see

https://www.gov.uk/government/publications/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band

so overall there is no IHT to pay anyway if they do nothing except leave everything to their spouse.

Jon12345

Currently, the will is set up to leave nearly everything to me. However, she is leaving a ring to a cousin of mine, a couple of bits here and there. So, since all the assets are not going to me, that means the estate is currently liable for IHT, right?

Bluebirdman_of_Alcathays

There will be no IHT to pay as the estate is not of high enough value, read the link in post #3.

Keep_pedalling

Jon12345 wrote: »

Currently, the will is set up to leave nearly everything to me. However, she is leaving a ring to a cousin of mine, a couple of bits here and there. So, since all the assets are not going to me, that means the estate is currently liable for IHT, right?

Wrong, they are currently at the upper limit of the nil rate band so there would be little or no IHT to pay, and with the additional allowence to pass you house to your children about to kick in they will be well within the nil rate band.

Even if they were in IHT territory it does not matter who you pass your estate to, the tax doe will be the same unless you leave your house to someone who is not a direct descendant.

This does assume your parents are actually married, if not the best thing they can do is to do so.

Keep_pedalling

Have your parents given you or anyone else any large gifts in the last 7 years?

Jon12345

So am I right in thinking that if one parent dies, that £325K allowance gets added to the £325K of the other parent? So then, if they also die later, a £650K allowance is available and so in my described scenario, there are no IHT duties to pay?

What if the property is worth £700K? £600K was only a guestimate.

xylophone

If your parents own the property as tenants-in-common, it would be possible for each to leave his/her interest in the property to you (or indeed anybody else) in his/her will.

If the property is owned as joint tenants, then the property passes to the survivor automatically on the death of the first to die.

xylophone

http://www.rossmartin.co.uk/private-client-a-estate-planning/inheritance-tax-probate/666-iht-transferable-nil-rate-band-records

re transferable nil rate band.

getmore4less

Bluebirdman_of_Alcathays wrote: »

The very best way is to give it to you now and make sure they live seven years.

Where would the parents live if they did that?