IHT from married couple parents to child

hgd7

I have looked online but appreciate some unofficial guidance so I understand this correctly. I have a property worth today at £850k. Owned with my wife, once one of us passes on, the other inherits (tax free) - however once I or my partner are both gone and we want this passed to our children, is there any IHT to pay? From what I understand, each has £325k allowance so 2 x 325 = £650k plus £175k each for main residence allowance (2 x 175 = £350k). 

This gives a total of £1m, as our property and estate falls below this and all will be handed to our children, will they have to pay any IHT and if so, what calculations should be used? Thank you. 

RAS

Provided you don't divorce, the IHT allowances on the second death will be £1m under current rules, as per your query.

This remains so even if the property is sold prior to death to pay for alternative accommodation or a care home. 

Keep_pedalling

None but house price inflation could push you above the £1M exemptions and of cause the IHT rules might change in the mean time. 

Grumpelstiltskin

Problem is although the allowance is £1m now who knows what it will be in 5, 10, 15, 20 years time.

Savvy_Sue

Keep_pedalling said:

None but house price inflation could push you above the £1M exemptions and of cause the IHT rules might change in the mean time. 

Grumpelstiltskin said:

Problem is although the allowance is £1m now who knows what it will be in 5, 10, 15, 20 years time.

Those are both true, which means that all you can do is write you will for whatever situation applies at the time of writing, and then keep it under review. 

In the good old days (when my parents were writing wills) it was customary to write wills in a particular way to avoid IHT. Then the law changed, my parents failed to change their wills, and we had to draw up a Deed of Variation on the first death to avoid IHT. 

diystarter7

Hi OP

As things stand, the simple answer is no.

Others have rightly pointed out to house price infaltion possibly taking it over the million mark

However, also be aware that the taxes inc IHT could easily change for the worse and the current 1 million could be reduced. Having said that I doubt it re IHT with the Tories in nuber ten but others if they get into nuber ten could change that

Btw, you appear eager to get money to your kids, rightly so as you have worked hard and been prudent with your hard earned cash Please do not forget the possibility of care home admission/fees etc. You can take out life insurance that is payable directly to your kids as you want it - I thinks its called life insurannce for beneficiaries, but please check. Indeed, payments will need to be made until one or both of you pass on depending on what life insurance you take out. If you do and end up in a care home, at least some money will go to kids. Often, where an adult child/children live in parents' property and worth more than a million as many places, ordianry homes are in parts of london, the adult child may have to sell up for IHT, but if a life insurance was in place that should cover or more the IHT

you could give away 6k each per fincail year and if you did not for the previous financial year, you can use that 6k each as well.

Check the gov site re tax exempt gifts

Good luc

Keep_pedalling

One other point worth raising is that to have over 85% of you net worth in your own home create a couple of potential issues. The first is that it it makes it difficult to mitigate IHT as gifting you home or part of it is not a practical option. You are also in danger of being asset rich and cash poor which is not a great position to be in in your latter years, so in your position I would look at freeing up some capital by downsizing.