IHT - reduce amount paid on uncle's estate

Stephie2021

Hi,
My uncle died in April 2019 and as an unmarried man with no children, the IHT liability for his estate was £80,000 as the residence nil-rate band couldn't be applied.  His brother, my father, inherited the remainder.

Apart from redirecting the whole estate to charity, is there any way a Deed of Variation could reduce the IHT liability so that we could apply for a rebate? My father would like to keep his brother's money within the family, and is aware that any DofV would have to be enacted within 2 years of his brother's death.
Thanks.

Jeremy535897

Apart from varying the will in favour of exempt beneficiaries like charities, there is nothing I can think of. However, it may be sensible for your father to vary the will if he doesn't need the money himself, so that the money is not taxable again, on his death.

Thrugelmir

If everybody wanted to keep the money in the family. No one would ever pay any tax. 

sheramber

How does redirecting the whole estate to a charity keep the money in the family?
Unless the family is the 'charity'.

macman

It doesn't, but some people would rather their family got less, or nothing, if it keeps it out of the clutches of the evil taxman.

Mickey666

Yes, it sounds very odd.  On that basis should we all give up working so we don't have to pay tax? 

What's IHT these days - 40%?  So the Uncle's estate owes £80k in IHT meaning it must be £200k over the threshold.  But the sole beneficiary brother doesn't want the taxman to get any IHT so is considering foregoing £120k of his own inheritance by donating the whole £200k to a charity.  That's a very expensive way of avoiding some tax!  Plus, it's pretty much pointless anyway because of that £200k pretty much ALL of it will filter back to the taxman in one way or another anyway as the charity spends the money on stuff.

Some very weird thought processes out there.

uknick

Mickey666 said:

Yes, it sounds very odd.  On that basis should we all give up working so we don't have to pay tax? 

What's IHT these days - 40%?  So the Uncle's estate owes £80k in IHT meaning it must be £200k over the threshold.  But the sole beneficiary brother doesn't want the taxman to get any IHT so is considering foregoing £120k of his own inheritance by donating the whole £200k to a charity.  That's a very expensive way of avoiding some tax!  Plus, it's pretty much pointless anyway because of that £200k pretty much ALL of it will filter back to the taxman in one way or another anyway as the charity spends the money on stuff.

Some very weird thought processes out there.

A bit like people who decide not to work overtime as it takes them into the 40% band; so instead of getting £60 of each £100 they get nothing.  That's really  putting it to the man 

Stephie2021

Sorry, I wasn't very clear. What I meant was that we know the estate would not be liable for any IHT if it was all being left to charity - some is already going to charity via 3 fixed sums bequeathed in the will. But are there any other options, such as a Will Trust, that could be set up via a DoV so that there is less IHT to be paid by the estate? Dad would just like as much of his brother's money to be passed to the family as possible, as it seems a shame that so much is being swallowed up by IHT just because the residence nil-rate band doesn't apply.

Keep_pedalling

Stephie2021 said:

Sorry, I wasn't very clear. What I meant was that we know the estate would not be liable for any IHT if it was all being left to charity - some is already going to charity via 3 fixed sums bequeathed in the will. But are there any other options, such as a Will Trust, that could be set up via a DoV so that there is less IHT to be paid by the estate? Dad would just like as much of his brother's money to be passed to the family as possible, as it seems a shame that so much is being swallowed up by IHT just because the residence nil-rate band doesn't apply.

The time for IHT planning needs to be done in your lifetime, and a good few years before you die. Post-mortem there is nothing you can do to maximise the amount that ends up with your nearest and dearest.

macman

Stephie2021 said:

Sorry, I wasn't very clear. What I meant was that we know the estate would not be liable for any IHT if it was all being left to charity - some is already going to charity via 3 fixed sums bequeathed in the will. But are there any other options, such as a Will Trust, that could be set up via a DoV so that there is less IHT to be paid by the estate? Dad would just like as much of his brother's money to be passed to the family as possible, as it seems a shame that so much is being swallowed up by IHT just because the residence nil-rate band doesn't apply.

You can set up a DoV in whatever way you wish, but every pound you give to charity is a pound less to the family. 

Stephie2021

Sounds like my dad will just have to accept that there's nothing he can do about the £60,000+ paid in IHT by his brother's estate. Unfortunately his brother wasn't very good at planning ahead, apart from writing a will. We will just have to do our own financial planning to make sure no more family money is swallowed up by IHT in the future.