General question about spouse exemption & gifting

getmore4less

Inigo_Montoya said:

SeniorSam said:

If the first death was within two years, then the first Will can be changed so that the gifts were made by the fist to die to the children and not to the spouse. This is far better and any solicitor would be able to help you complete the necessary papers.

In the scenario I was considering the nil rate band of the first deceased has *already* been "used up" by monies given to the children & it is only the residual estate that has been given to the surviving spouse

therefore any further gifting in the first Will via a Deed of Variation would be liable to IHT so does not make financial sense

Also apologies if my terminology is incorrect as i am coming at this as just a layperson who has done some reading

The transferable nil rate band(~2007)  made the use up nil rate band redundant and less tax efficient for most couple estates.

Could DOV the other way to preserve the nil rate band  then imediate gifting should come under scrutiny.

SeniorSam

There are so many unknowns in this initial question and the DOV within 2 years of death is but one solution to be considered.
That DOV could change the Will to gift up to the nil rate band into Trust for the children, which would use the first nil rate band, but considering the death of both, there will be two nil rate bands plus the Residential allowances.

Lets suppose that the surviving spouse needed the gifted capital, then the surviving spouse could request the trustees allow that they retain that capital in exchange for an IOU for that sum, repayable when they eventually die. In that way, they have protected at least the first nil rate band sum for the children and not restricted capital access for the surviving spouse. Alternatively, allow the sum to remain in Trust and at a later date, if needed, the trustees could make a loan to the surviving spouse. That way, the capital could be growing in the Trust and not in the estate.

Other Trust arrangements may be suitable for some with substantial assets, by gifting or even Lending to a Trust during lifetime.

Initial suggestions are just for consideration and by knowing ALL the circumstances, which we do not know in this case, can the best option be considered. If in fact the nil rate band of the first to die has already been used up, then further gifting with DOV would attract tax and should be avoided, but this was not mentioned earlier.

Inigo_Montoya

getmore4less said:

Inigo_Montoya said:

SeniorSam said:

If the first death was within two years, then the first Will can be changed so that the gifts were made by the fist to die to the children and not to the spouse. This is far better and any solicitor would be able to help you complete the necessary papers.

In the scenario I was considering the nil rate band of the first deceased has *already* been "used up" by monies given to the children & it is only the residual estate that has been given to the surviving spouse

therefore any further gifting in the first Will via a Deed of Variation would be liable to IHT so does not make financial sense

Also apologies if my terminology is incorrect as i am coming at this as just a layperson who has done some reading

The transferable nil rate band(~2007)  made the use up nil rate band redundant and less tax efficient for most couple estates.

Could DOV the other way to preserve the nil rate band  then imediate gifting should come under scrutiny.

Just out of interest can I ask why it is usually more tax efficient to transfer the nil rate band of the first deceased over to the surviving spouse ? 

getmore4less

Inigo_Montoya said:

getmore4less said:

Inigo_Montoya said:

SeniorSam said:

If the first death was within two years, then the first Will can be changed so that the gifts were made by the fist to die to the children and not to the spouse. This is far better and any solicitor would be able to help you complete the necessary papers.

In the scenario I was considering the nil rate band of the first deceased has *already* been "used up" by monies given to the children & it is only the residual estate that has been given to the surviving spouse

therefore any further gifting in the first Will via a Deed of Variation would be liable to IHT so does not make financial sense

Also apologies if my terminology is incorrect as i am coming at this as just a layperson who has done some reading

The transferable nil rate band(~2007)  made the use up nil rate band redundant and less tax efficient for most couple estates.

Could DOV the other way to preserve the nil rate band  then imediate gifting should come under scrutiny.

Just out of interest can I ask why it is usually more tax efficient to transfer the nil rate band of the first deceased over to the surviving spouse ? 

It gives more time to use up assets without using the nil rate band.

Tax efficient only really matters if there is tax for a couple with IHT that £1m+ if done right.

A lot of people have lost the residential nil rates using unsuitable trusts.

If in that region multi generation planning should be in place as you just pass a bigger problem to the next generation if they are building assets.

Inigo_Montoya

getmore4less said:

Inigo_Montoya said:

getmore4less said:

Inigo_Montoya said:

SeniorSam said:

If the first death was within two years, then the first Will can be changed so that the gifts were made by the fist to die to the children and not to the spouse. This is far better and any solicitor would be able to help you complete the necessary papers.

In the scenario I was considering the nil rate band of the first deceased has *already* been "used up" by monies given to the children & it is only the residual estate that has been given to the surviving spouse

therefore any further gifting in the first Will via a Deed of Variation would be liable to IHT so does not make financial sense

Also apologies if my terminology is incorrect as i am coming at this as just a layperson who has done some reading

The transferable nil rate band(~2007)  made the use up nil rate band redundant and less tax efficient for most couple estates.

Could DOV the other way to preserve the nil rate band  then imediate gifting should come under scrutiny.

Just out of interest can I ask why it is usually more tax efficient to transfer the nil rate band of the first deceased over to the surviving spouse ? 

It gives more time to use up assets without using the nil rate band.

Tax efficient only really matters if there is tax for a couple with IHT that £1m+ if done right.

A lot of people have lost the residential nil rates using unsuitable trusts.

If in that region multi generation planning should be in place as you just pass a bigger problem to the next generation if they are building assets.

Another question if I may with regards to this statement 

"A lot of people have lost the residential nil rates using unsuitable trusts."

Would you be able to expand a little on that statement as in the scenario I have in mind the main & only residence is passing on Trust to the surviving spouse & then on the death of the surviving spouse to the children in equal share

What is the difference between a suitable Trust & an unsuitable one with regards to claiming both the residence nil rate band & transferable residence nil rate band on the death of the 2nd spouse ?

getmore4less

Is that all the house or just part of it.

How old is this will
What advise was taken

To get the residential there are two main requirements

Suitable property(including downsize rules or QIIP*) and suitable beneficiary.

IPDI trusts are suitable as the survivor retains the beneficial interest for their lifetime.

Many others don't as the beneficial interest passes to the trust.

You may benefit from doing a lot more research and getting proper legal.

Have a good read through the IHT manual

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm46000
* https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm46055

Inigo_Montoya

getmore4less said:

Is that all the house or just part of it.

How old is this will
What advise was taken

To get the residential there are two main requirements

Suitable property(including downsize rules or QIIP*) and suitable beneficiary.

IPDI trusts are suitable as the survivor retains the beneficial interest for their lifetime.

Many others don't as the beneficial interest passes to the trust.

You may benefit from doing a lot more research and getting proper legal.

Have a good read through the IHT manual

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm46000
* https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm46055

thank you I will look into this to ensure the Will has been written so as to set up the correct type of Trust

getmore4less

Now reading this is pre first death and planning

Initially thought it was post and dealing with existing will.