Inheritance tax planning

Frogletina

shiraz99 said:

Frogletina said:

As I understand it, as shiraz99 says, the basic £325k nil rate allowance is only transferable between married couples, and then only if they leave their estate to one another. 

Can I check if this is correct? 

I was married when my husband passed away, but his will, of which I was executor, passed all of his assets, including his house, to our children.

From what I have read, I believe his unused nil rate allowance passes to me.

Were you not Joint Tenants for the house? If so, how can you late husband pass the house on to your children, under the right of survivorship the house would automatically go to you, superseding what's written in the will. 

No, we were not joint tenants. When the house was purchased in 1973, I was 6 months pregnant and my husband dealt with everything - he put the deposit down and the house and mortgage was in his sole name. I didn't know as much about finances then as I do now. 

We separated some years ago, but never divorced. I was aware that his will left his estate to our children and I was happy with that

Frogletina

p00hsticks said:

Frogletina said:

As I understand it, as shiraz99 says, the basic £325k nil rate allowance is only transferable between married couples, and then only if they leave their estate to one another. 

Can I check if this is correct? 

I was married when my husband passed away, but his will, of which I was executor, passed all of his assets, including his house, to our children.

From what I have read, I believe his unused nil rate allowance passes to me.

Apologies, I worded that badly. You are correct in saying that as spouse you would inherit any unused nil rate allowance.

However, you get to the unused amount by deducting the value of the assets left to others. And I was rather assuming that these days, in most parts of the country, if those assets include property it is likely that most of it would be used up and there would be little/nothing left unused to transfer

Thanks for the reply. As you can see from one of my replies that there will be some of his Nil Rate Allowance left. I was concerned that I had interpreted the rules incorrectly.

Geraldsprawnsandwich

Thank you keep_pedalling
my estate is worth £300k I am currently leaving it all to my partner. If she pre deceases me it will go to her 3 children and my 2 god daughters equally.

Keep_pedalling

Geraldsprawnsandwich said:

Thank you keep_pedalling
my estate is worth £300k I am currently leaving it all to my partner. If she pre deceases me it will go to her 3 children and my 2 god daughters equally.

So as it stands if you were to die tomorrow your partner would inherit your entire estate and would have a net worth of £1.1M. There will be no IHT to pay on your estate but if she died a month later she would only have £500k of exemptions so £600k would be taxable leaving a tax bill of £240k. If you were married however her estate would be able to claim the transferable NRB giving it £825k of exemptions reducing the tax bill to £110k. You could lower this by leaving part of your estate to your Godchildren in the rather than everything to her.

If your partner died first leaving her entire estate to her children then regardless of her marital status £300k of her estate would be taxable (£120k). She could reduce this by gifting now and staying alive for the next 7 years, or if you were married she could gift to you and you then gift to them which would decrease the risk of dying within 7 years because of your age difference. She could also leave part of her estate to you which would be covered by marital exemption.