Can a Deed of Variation save IHT?

getmore4less

Should add who are the beneficiaries of of each estate as it is them that need to do the DOV.
executors/HMRC need to be involved if it reduces any IHT

Langtang

getmore4less said:

Langtang said:

theoretica said:

How much of MIL's tax free amount was unused?

Little, if any.

Given they had potentially £1m if there was property(down sizing rules apply as well)

Has full use of this been made

What's the total estate?

Almost all of it was used. There were 5 insurance bonds that were in both names - so last to die (MIL) had those in estate. FIL had shares and cash

Total (just) under £1m, but as 2 separate estates due to 30 day clause.

Langtang

getmore4less said:

Should add who are the beneficiaries of of each estate as it is them that need to do the DOV.
executors/HMRC need to be involved if it reduces any IHT

My wife is only beneficiary.

getmore4less

if all the nil rate band and residential Nil rate bands were use where did the £110k tax bill come in?

How much was the house worth, who owned that?
Any house moves since July 2015.

theoretica

Langtang said:

getmore4less said:

Langtang said:

theoretica said:

How much of MIL's tax free amount was unused?

Little, if any.

Given they had potentially £1m if there was property(down sizing rules apply as well)

Has full use of this been made

What's the total estate?

Almost all of it was used. There were 5 insurance bonds that were in both names - so last to die (MIL) had those in estate. FIL had shares and cash

Total (just) under £1m, but as 2 separate estates due to 30 day clause.

If almost all of it was used there is little to gain by exploring a DOV - the most that could theoretically be gained is tweaking things so that all the tax free amount was used and the tax on that portion saved/reclaimed.

Inheritance tax depends on the bequeather - not on who inherits it.

Langtang

getmore4less said:

if all the nil rate band and residential Nil rate bands were use where did the £110k tax bill come in?

How much was the house worth, who owned that?
Any house moves since July 2015.

Full value of house (£300k) was all with MIL, as were proceeds of insurance bonds. FIL had shares, inheritance from sister and cash.

I think I've made a critical error in asking the question in the 1st place. I had, stupidly, thought that the DoV could help me claw back some IHT but obviously the DoV will be funded by monies in estate, so still liable to IHT regardless if we're "giving it away"

getmore4less

Not necessarily it depends what you did with each bit.

If the total was under £1m there should be options to reduce a £110k tax bill.

Any DOV would be to make use of spouse exemption if all the wife's allowance was not used.

When did the sister die there may be an option for a DOV on that as well, that would take assets out of the estates.

What values have you used on each tax return.

Langtang

buddy9 said:

Langtang
The reply from poppystar seems accurate. The other responder do not seem to understand your situation.

Indeed. Thanks.

getmore4less

buddy9 said:

Langtang
The reply from poppystar seems accurate. The other responder do not seem to understand your situation.

If the estates together were under £1m then the is probably something that be done to make use of all the nil rate bands (Transfer of assets to spouse via DOV )

Maybe just £300k of the RNRB if that's what the only property still that £950k available leaving ~£50k £20k IHT not £110k OP needs to explain why there was £110k IHT on a total of both estate under £1m where there is transferable nil rate bands and spouse exemption available

if we assume the full £1m and a house of £300k just owned by the wife

In the opening post FIL had everything else and as such, attracted IHT of c£110k and was the first to die

that implies an estate of £325k + £275k taxable

That leaves £400k with the wife, £300k being the house £100k other assets

DOV £275k to the wife(exempt), Now NO tax on FIL estate uses up the NRB
(if he previously owned property there are other options)

WIfe now has £375+£300k house.
house uses up the RNrB  £175k MIL and the £175k transferable from FIL 

Leaving MIL with £325k NRN and £50k taxable new tax bill £20k

Depending how long ago they inherited from the sister there may be an option to reduce the tax even further.

buddy9

getmore4less said:

 (Transfer of assets to spouse via DOV )

I think you can only transer assets via a deed of variation to a living person. The wife is deceased.

getmore4less said:.

 and spouse exemption available

The OP has stated that the estates were dealt with seperately due to the provisions of the will. No estate passed to the spouse so I don't think the spouse exemption is available.