IHT for my Grandmother

jessmjc

Folks
My Grandfather died back in 1978 leaving at the time a very small estate (£20K ish ) to my grandmother.

My Grandmother is still alive. Do the new rues mean that my Grandmother's limit is now £600,000 ? or is still £300,000 ?


regards

Jessmjc

KeithP

£600,000 is the answer.

KeithP

No I don't think so, Jimmo.

Since Grandfather left his estate to his wife, he didn't use any of his tax-free allowance - no inheritance tax (or allowance) when passing estate from one spouse to another.

Thus, your Grandmother's limit is now £600,000, i.e. all of her tax free allowance plus all of Grandfather's.

This is only my humble opinion. Please someone, correct me if I am wrong.

margaretclare

Info on the changes in plain English:

http://business.timesonline.co.uk/tol/business/money/tax/article2647161.ece

Margaret

jem16

margaretclare wrote: »

Info on the changes in plain English:

http://business.timesonline.co.uk/tol/business/money/tax/article2647161.ece

Margaret

It's not as plain as it should be though.

The article implies that it's the unused amount that is passed on for the survivor to use whereas it's the unused percentage that is passed on. It makes no difference while the allowance remains the same but will make a difference as the allowance rises.

KeithP is correct - grandmother now has 2 x tax-free allowances to use as the OP states that grandfather's whole estate passed to grandmother.

localhero

Yes that's right Sloughflint. The Times article doesn't actually explain clearly the effect of the first to die making gifts.

It works like this. Let's say 1st spouse dies this tax year. He leaves £100,000 to his children, remainder to spouse. He has used 1/3 of his allowance.

Surviving spouse dies in 2010. She's got £350,000 + 2/3 of the unused allowance at the later 2010 rate. (£350,000 + £233,333 = £583,333)

The OP said that his nan received all of grandad's estate so she will receive 100% of his threshold when she dies.

chris2fer

localhero wrote: »

Yes that's right Sloughflint. The Times article doesn't actually explain clearly the effect of the first to die making gifts.

It works like this. Let's say 1st spouse dies this tax year. He leaves £100,000 to his children, remainder to spouse. He has used 1/3 of his allowance.

Surviving spouse dies in 2010. She's got £350,000 + 2/3 of the unused allowance at the later 2010 rate. (£350,000 + £233,333 = £583,333)

The OP said that his nan received all of grandad's estate so she will receive 100% of his threshold when she dies.

Hi forgive me if this makes no sense, i understand the above but-

What happens if the first spouse dies this year and left $100000 now + 1/2 his house in a lifetime trust for his children. For IHT purposes when the surviving spouse dies wont the ENTIRE house still be liable for IHT because it will be seen as she has benifited by still living there even though the 1st spouse gave his share to his children.