IHT v CGT

Newnoel

Hello


My wife is currently working with her parents on estate planning


The parents PPR is worth approx £900k, and they have an inherited second home worth approx £400k (value at probate was £160k)


Notwithstanding the seven year rule, would her parents be better off paying the CGT and gifting us the smaller property or would the IHT tax liability be lower if we wait for it to be passed on to us?

Newnoel

Both properties held mortgage free.

Keep_pedalling

If I was them I would look at selling the second property, paying the CGT and gifting the rest in cash. Do you really want to be in the same position with the the vast majority of wealth tied up in illiquid assets?

Under current rules IHT has the higher tax potential.

Whatever they do they should look at covering the risk dying within 7 years of their gift with term insurance written in trust.

Newnoel

Keep_pedalling wrote: »

If I was them I would look at selling the second property, paying the CGT and gifting the rest in cash. Do you really want to be in the same position with the the vast majority of wealth tied up in illiquid assets?

Under current rules IHT has the higher tax potential. t.

Thanks

How does the £1m allowance for the family home play into tnis?

Linton

There isnt a £1M allowance for the family home - that's a journalists description. Assuming parent 1 dies and passes everything to parent 2, then parent 2 dies:


There is a 2X£325K IHT allowance and an extra 2X£175k allowance in 2020/21 for the family home giving a total of £1M. Assuming there is no change in house prices that would leave £100K allowance against the second house and all other assets.