Reducing Inheritance Tax

Bluebirdman_of_Alcathays

getmore4less wrote: »

Where would the parents live if they did that?

I don't know? But the question was about the best way to avoid IHT - I can think of no better way.

CLAPTON

Bluebirdman_of_Alcathays wrote: »

I don't know? But the question was about the best way to avoid IHT - I can think of no better way.

If the intend is to give practical advise then it is nonsense and harmful to the OP.

CLAPTON

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?

Each of your parents need a will of their own.

What are the provisions of both wills?
how is the house owned ..joint tenants of tenants in common?
if you are left part of the house on the first death (and you don't live there) then you may be liable to cgt when it is eventually sold.

No if some gifts are given to others, then that doesn't mean the estate is liable automatically to IHT


In the kindest way possible, you appear to have no idea about IHT rules either at present or the 2017 changes and no idea about cgt either.

I would suggest you find out the full facts and post them here and/or see a solicitor that specialises in wills/iht etc.

p00hsticks

Bluebirdman_of_Alcathays wrote: »

I don't know? But the question was about the best way to avoid IHT - I can think of no better way.

But if the parents continue to live in the property without paying a market rent after making the gift then it would be classed as a 'gift with reservation' and HMRC would still consider it as part of the parents estate for IHT purposes.
http://www.which.co.uk/money/tax/guides/inheritance-tax-explained/gifts-with-strings-attached/

It would also leave the recipient with a potential Capital Gains Tax liabilty when they come to sell it.

In general gifting children a property while continuing to live in it is not tax efficient.

UKSBD

Does the family home allowance apply to dead partners too?


husband and wife, wife dies so £325k allowance passes to husband.


If husband dies after 2020 his allowance is £325k + £175k


Is the dead wife's £325k added or is it £500k? (the £325k + £175k home allowance)


Would total allowance be £825k or £1m? (assuming property is £1m)

Jon12345

@clapton, I was a trained advisor on IHT about 20 years ago so your comment is not entirely true. I am aware of the provisions, but I want to check if anything has changed, the dates they kick in etc. Bexit and chancellor change may have affected plans.

These things can be in constant flux with a variable political climate.

I have not been privy to the Will. One of the key questions was really this: does the IHT allowance of £325K get carried over to the other partner. Also, what is both die at the same time?

Another factor, if Corbyn gets in power, and he decides to reduce the IHT allowance or increase its rates, would it have been better off to have half the estate transferred to me on the death of one parent.

Last complicating factor is that there is a £200K charge on the property, where my parents did an Equity Release on the property. That should keep the estate under £600K but does that affect any IHT allowance due to the charge being on the property. I suspect not but I don't know for sure.

xylophone

if you are left part of the house on the first death (and you don't live there) then you may be liable to cgt when it is eventually sold.

But against that, if the remaining parent had to go into means tested care, only his/her half interest could be assessed for this.

xylophone

Does the family home allowance apply to dead partners too?

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

This measure introduces an additional nil-rate band when a residence is passed on death to a direct descendant.

This will be:

£100,000 in 2017 to 2018
£125,000 in 2018 to 2019
£150,000 in 2019 to 2020
£175,000 in 2020 to 2021
It will then increase in line with Consumer Prices Index (CPI) from 2021 to 2022 onwards. Any unused nil-rate band will be able to be transferred to a surviving spouse or civil partner.

UKSBD

xylophone wrote: »

Any unused nil-rate band will be able to be transferred to a surviving spouse or civil partner.

Yes, but is it the rate when they die or does it increase as though they were alive?

xylophone

One of the key questions was really this: does the IHT allowance of £325K get carried over to the other partner.

See link post 10.

Also, what is both die at the same time?

http://clarkekiernan.com/contentious-probate/simultaneous-deaths