Reducing Inheritance Tax

CLAPTON

Jon12345 wrote: »

@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.

even 20 years ago it was necessary to know the facts.
it still is.

Keep_pedalling

xylophone wrote: »

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

With a house of that value it would be highly unlikely that more than half of its value would be eaten up by care home fees bearing in mind that the vast majority of people who go into care die within the first 3 years of moving in, so I think CGT is the higher risk.

Unless the OPs figures are wrong there is no need for IHT planning, and the priority should be making sure they have up to date wills and LPAs in place.

Edit - The OP should start considering his position as far as IHT is concerned, which may impact on how his parents construct their wills. If Jon has children then his parents could leave some of their estate to them to avoid his estate going over the threshold.

xylophone

With a house of that value it would be highly unlikely that more than half of its value would be eaten up by care home fees

My relative's relative is currently paying over £5200 a month in care home fees (which increase annually by well over the rate of inflation...)

This person has been in care for three years so far - her best friend in the home recently died aged over 100.

xylophone

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

http://www.skerritts.co.uk/pages/10+things+advisers+need+to+know+about+the+residence+nil+rate+band

The Residence Nil Rate Band will be transferable between spouses and civil partners on death, much like the standard nil rate band. It is the unused percentage of the RNRB from the estate of the first to die which can be claimed on the second death.

This is irrespective of when the first death occurred or whether they owned

residential property at their death. There will always be an additional 100% RNRB unless the first spouse's estate was greater than £2M.

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

Keep_pedalling

xylophone wrote: »

My relative's relative is currently paying over £5200 a month in care home fees (which increase annually by well over the rate of inflation...)

This person has been in care for three years so far - her best friend in the home recently died aged over 100.

Yes I know the sort of costs involved are horrendous, but in the OPs case the house would provide 10 years care with no other income coming in and with a resonable pension much longer. Frankly I would risk the lot, if I end up spending many years in a care home I want the best I can get.

UKSBD

xylophone wrote: »

It is the unused percentage of the RNRB from the estate of the first to die which can be claimed on the second death.

Does that mean if the remaining partner is likely to die within the 7 years it is best to have nothing out of the 1st to dies allowance?


i.e a child could have the full £325k straight away (but that would be 100%)


where as if they wait until after 2020 they are entitled to £500k (plus another 500k from 2nd persons death, and from value of home)

Savvy_Sue

Jon12345 wrote: »

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.

I'm not sure anyone can answer that: IF Corbyn comes to power, who knows what he will do, and IF he decided to reduce IHT, might he not decide to do a number of other things which could affect the situation?

Best advice is usually to work on the current situation when writing a will, and review it at regular intervals, especially if the law changes!