Inheritance Tax Spouse/children split

bracken2019

When a spouse dies then ALL of the estate passes to the surviving partner regardless if its over the IHT limit, I know that. But say either of us, on death, wanted to leave a sum to the children, what are the implications (if any). Example being if the portion of the dead spouses estate is worth £500k and instead of passing it all to the survivor, he/she wanted to leave £50k to their children. Is any of this due IHT? Is it classed as a gift with the 7 year rule? I have asked Inland Revenue but they can't or won't tell me! (they make the rules for goodness sake and if anything is due will soon chase it!)

Tom99

bracken2019 wrote: »

When a spouse dies then ALL of the estate passes to the surviving partner regardless if its over the IHT limit, I know that. But say either of us, on death, wanted to leave a sum to the children, what are the implications (if any). Example being if the portion of the dead spouses estate is worth £500k and instead of passing it all to the survivor, he/she wanted to leave £50k to their children. Is any of this due IHT? Is it classed as a gift with the 7 year rule? I have asked Inland Revenue but they can't or won't tell me! (they make the rules for goodness sake and if anything is due will soon chase it!)

[FONT=Verdana, sans-serif]No only the 1st £250k goes to the spouse unless there is a will.[/FONT]
[FONT=Verdana, sans-serif]If the 1st to go leaves £50k to children there will be no IHT but only £325k-£50k=£275K nil rate band is passed to the surviving spouse.[/FONT]
[FONT=Verdana, sans-serif]Its is much better, tax wise, for spouses to leave everything to each other and the survivor then gifts money to the children, that way the survivor has £325k+£325k NRB and 2 lots of RNRB which will give a total of £1m IHT free by 2020.[/FONT]

xylophone

Is your home owned as joint tenants or as tenants in common?

Have you both made wills?

https://www.gov.uk/inherits-someone-dies-without-will

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

https://www.which.co.uk/money/tax/inheritance-tax/inheritance-tax-for-married-couples-and-civil-partners-a1vvf7h17jpc

Heedtheadvice

.......and where do you live? That can make a difference can it not? Some laws are uk wide, others country specific!


There is a useful web site called unlock the law. They might be looking for business but do seem to have many good guides. See https://www.unlockthelaw.co.uk/wills-trusts-probate.html
Things can be complex rather than simple so maybe best to get professional will advice?


Consider the following applicable to Scotland from that web site:
"

Prior Rights

Before any other sum of money is paid, your spouse or civil partner (if you have one) has various ‘prior rights’. These include the right to your house, if you have one, the right to furniture up the value of £29,000 and the right to a sum of money. The entitlement to a lump sum can amount to £50,000 where there is surviving children and £89,000 where there is not. This sum of money is satisfied from both the value of the house and your moveable assets equally.

Legal Rights

If, after payment of prior rights, there is money left over, then this will be distributed according to the rules on ‘legal rights’.

Legal rights are taken solely from your moveable estate and are divided into three. First, your spouse is entitled to either a half share or a third share, depending on whether you have surviving children from the marriage. Secondly, any surviving children are entitled to either a half share or a third share, depending on whether you have a surviving spouse. If there are multiple children, then they must share this sum between them equally. In addition, if a child dies before you, then that child’s own children can inherit in their place and, again, if there are multiple children, they must share their parent’s entitlement equally. The law does not take into consideration if a child’s parents are unmarried or if the child is adopted.

The final third or half, depending on whether there is both a surviving spouse and children, is what is called the ‘free estate’. The free estate is distributed according to a list set down by the Succession Act. The list favours the children and is as follows: children, parents and siblings, siblings (if there are no surviving parents), parents (if there are no surviving siblings), spouse, uncles and aunts, grandparents, grandparents’ siblings and then so on.
"

Keep_pedalling

Providing the amount you leave your children falls below £325k then there will be no IHT to pay, but it will reduce the combined nil rate band on the second death so over all makes little difference to the amount of tax falling on the joint net worth. If your combined estate are likely to fall into IHT territory then you should be looking at not waiting to die before passing some of your net worth to your children.