Inheritance tax allowance - Grandparents - Surviving Grandad

Keep_pedalling

McAnniee wrote: »

Sorry, what I meant that "IHT still applies" was that the same rules and thresholds are applied regardless of whether the estate is left to a grandchild, the local Cats' Charity, or whatever. (Except maybe in the specific case of the direct descendant)

The estate will definitely not be worth more than £650k although I'm unsure of the exact numbers and that £450k is my best estimate.

For the size of estate your are describing the rules are the same regardless of who it is left to, but it does get more complicated with bigger estates. If I leave £2m to the cats home then as this is probably a registered charity there will be no tax to pay. If I leave it to a relative or friend anything over £650k will be taxed, assuming I am a widow and my wife left everything to me.

Assuming I own my home, and die after April 5th I will have another £100k to leave tax free but only if I am leaving at least £750k to my direct descendants.

kidmugsy

As long as Grandad's estate is less than £650k the extra 100k exemption for the home left to his grandchild won't matter because Grandad's estate won't be paying Inheritance Tax anyway.

But if in a few years Grandad's estate has shot up in value, or if your estimate of its size is far too low, then the increase in the nil rate band to account for his residence, passed on death to a direct descendant, would apply. Moreover its size will increase as the years go by.

relaxtwotribes

It is my understanding that if Grandad passes in this tax year, then his estate will have nil rate bands of £325k (his own), £325k (Grandma's unused NRB), £100k of residence NRB and also £100k of Grandma's unused residence NRB.
I know it will be academic if Grandad's estate is only worth £450k, but others may be interested to know that his total nil rate bands are £850k.