7 year ruling on inheritance tax

Reedy123

Hi,
I wonder if anybody could advise/point-me-in-the-right-direction, my sister has recently passed away leaving an Estate potentially over £325k, she left no will and me and my mother are her only family left, I understand that the estate will go into intestacy and will need to go to probate, my question is my mother is her next of kin and is also disabled and a pensioner she will inherit her estate under the rules of intestacy, she doesn't want anything to do with her estate for fear of losing her benefits and also being hit with inheritance tax, can she declare the house to myself as a gift, if so does this will it fall within the 7 year ruling and of course are there any other further tax implications that would be open to myself and my mother.

Thank You:)

silvercar

You can do a deed of variation, even if there is no will. That effectively changes who inherits, providing all would be beneficiaries agree.

TBagpuss

This would, I believe, be seen as deprivation of assets by your mother.

She would be better to accept the legacy - she can use this money to live off and will be able to re-apply for benefits once it is gone.

Inheritance tax is paid by the estate, not by the beneficiaries, so it would be paid first, so the amount that she will get (to be taken into account in considering her benefit entitlement) would be *after* the tax had been paid.

Yorkshireman99

Reedy123 wrote: »

Hi,
I wonder if anybody could advise/point-me-in-the-right-direction, my sister has recently passed away leaving an Estate potentially over £325k, she left no will and me and my mother are her only family left, I understand that the estate will go into intestacy and will need to go to probate, my question is my mother is her next of kin and is also disabled and a pensioner she will inherit her estate under the rules of intestacy, she doesn't want anything to do with her estate for fear of losing her benefits and also being hit with inheritance tax, can she declare the house to myself as a gift, if so does this will it fall within the 7 year ruling and of course are there any other further tax implications that would be open to myself and my mother.

Thank You:)

Assuming your sister had no children or spouse then the estate passes to your mother. Your mother cannot avoid the loss of benefits. Even if she refused the estate her benefits would still be cut if applicable. Inheritance tax is paid from the estate not by the beneficiaries. Your mother and yourself need paid for professional advice on how to make the most tax efficient way of dealing with the funds.

Keep_pedalling

Your mother will inherit, and there is no point in her passing the estate to you via a dead of variation to avoid losing her benefits because that would be classed deprivation of assets, and any benefits she would have lost with the inheritance will still be lost and she won't have the inheritance to replace it.

She should not worry about IHT as that is paid by the estate not her.

securityguy

Which benefits is your mother worried about losing? Her pension isn't means tested. Disability and attendance benefits mostly aren't means tested. Which benefit is she worried about losing? Housing benefit? But she'd have enough money to buy a house, right?

getmore4less

If your mother is worried that this inheritance along with her own assets may result in her estate being too large, or If this will be her only asset base then depending how much she could look at reducing the total.
There will be options to do a deed of variation to reduce the asset base and bypass the 7year rule for her estate, the size of the reduction would need careful consideration to avoid falling foul of deprivation issues.

pphillips

The main means-tested benefits are:
Income Support
Income-based Jobseeker's Allowance
Income-related Employment and Support Allowance
Pension Credit Guarantee Credit
Working tax credit
Child Tax Credit
Universal Credit
Housing Benefit
Council Tax Benefit
If your mum is on any of these benefits she needs to contact the DWP or Local Authority and inform them, otherwise she might be fraudulently claiming benefits while deliberately depriving herself of capital.

Sea_Shell

Does a deed of variation not effectively "re-write" any will or intestity rules, as if the new beneficiary were the original beneficiary? If so, how can that be deprivation of assets?

Mojisola

Sea_Shell wrote: »

Does a deed of variation not effectively "re-write" any will or intestity rules, as if the new beneficiary were the original beneficiary? If so, how can that be deprivation of assets?

No, the original beneficiary has to give up their inheritance and therefore deprive themselves of assets.

pollypenny

Good Lord, inheriting a substantial sum and worrying about losing benefits!

She won't need any blooming benefits with that sort of money!