IHT tax-free gifts

Keep_pedalling

It seems unfair to the rest of you to have to bare the IHT burden on something that only one of you is going to benefit for for the foreseeable future. Why does he have to have what sounds like a substantial property to live in on his own? I can’t really understand why he needs this particular house, surely something smaller and cheaper to run would be more suitable for him especially as you say he has health problems.

I think you also said the trust would be responsible for the upkeep, and on an older larger property that could involve substantial ongoing costs.

getmore4less

bring_back_threepenny_bit said:

Thanks, and just to clarify, so that I have sufficient grasp of the options before getting to a solicitor:
Under her current will, which is probably a simple will Trust, there would be 40% IHT (=£300k) to pay on the 2nd house.
Under a lifetime interest trust, there would be no IHT on the property on Mother's death. On the death of the sibling with the lifetime interest, IHT would be paid, but at that point they have their own Nil Rate band allowance so another £325k would be free of IHT? 
What I'm also not clear about is whether the the sibling can leave the property to the proverbial Cat's Home, as it is part of their Estate, or it automatically goes to the other original beneficiaries of Mother's will.

You have to be very careful here as there is a good chance residential nil rate bands could be lost along the way.

All of the estate will be taxable less allowances and nil rate bands,  putting into a life interest for a child does not get any relief(it gets taxed on each death) that only happens for a spouse life interest as it also comes with any residual transferable nil rate bands.

Can't remember if moving property into  life interest not eligable for RNRB but getting confused on which property is which here 

If that sibling is not passing any beneficial interest in property to a close descendant(you say they have no kids) they don't get a RNRB.

bring_back_threepenny_bit

getmore4less said:

bring_back_threepenny_bit said:

Thanks, and just to clarify, so that I have sufficient grasp of the options before getting to a solicitor:
Under her current will, which is probably a simple will Trust, there would be 40% IHT (=£300k) to pay on the 2nd house.
Under a lifetime interest trust, there would be no IHT on the property on Mother's death. On the death of the sibling with the lifetime interest, IHT would be paid, but at that point they have their own Nil Rate band allowance so another £325k would be free of IHT? 
What I'm also not clear about is whether the the sibling can leave the property to the proverbial Cat's Home, as it is part of their Estate, or it automatically goes to the other original beneficiaries of Mother's will.

You have to be very careful here as there is a good chance residential nil rate bands could be lost along the way.

All of the estate will be taxable less allowances and nil rate bands,  putting into a life interest for a child does not get any relief(it gets taxed on each death) that only happens for a spouse life interest as it also comes with any residual transferable nil rate bands.

Can't remember if moving property into  life interest not eligable for RNRB but getting confused on which property is which here 

If that sibling is not passing any beneficial interest in property to a close descendant(you say they have no kids) they don't get a RNRB.

The property that my sibling would live in isn't mum's main residence- but I'm wondering, based on your comments, if there might not be some advantage in their living in the main residence and the other one being sold instead. The values are broadly similar. Although as the main residence is being left to the children it qualifies for the RNRB anyway.