Advice on inheritance tax

Esther63

My friend's mum is ill. She doesn't know how much longer she has to live. She has a large house which they could sell. She and her sibling are to inherit. 
What's the best way forward?
Get lasting power of attorney in case her mum becomes to unwell to handle finances?
Move her mum closer and she can care for her?
They could sell the house now. It's large and would probably be above £500k. They want to avoid inheritance tax if possible. 
Any advice?
Thank you 

uknick

What value is her total estate estimated at?  Generally, that value needs to be any houses, cash/investments, other notable assets and gifts made in the last 7 years.  If the value is less than the allowances due (see below), no IHT to pay.

What IHT allowances will the mother have against her estate?  She could have up to £1m depending on whether there is a deceased spouse.  Her estate allowances are £325k plus £175k for the residence totaling £500k.  If she has a deceased spouse any unused allowances from their estate, up to another £500k, may be transferred to the mother's estate.

With regard to selling the house, are they thinking of doing it on the open market or to the children?  If to the children, there may be tax implications such as Capital Gains Tax when they come to sell it.

If you want a more detailed answer, more detail will be needed.

Daniel54

I’m not at all sure that IHT should be the current focus of your friend’s attention.

With no reason to think the  mother is lacking mental capacity as of now,then putting in place POAs should be a priority ( health and finance )

Does the mother have a will?If not,now is the time for her to make one.

Whether the mum moves closer is a matter for family discussion

If the house is sold the proceeds will in any case fall into the mother’s estate

Whether any eventual estate falls into IHT territory depends on the allowances set out by uknick

Maybe best for your friend to focus for now on what is best for her mother.

Keep_pedalling

It is far too late for IHT planning, but there may not actually be any IHT liability especially if she is a widow. 

The suggestion of LPA is a good one unless one is already in place.

Esther63

Thanks for the input from everyone, very much appreciated! 

Esther63

Daniel54 said:

I’m not at all sure that IHT should be the current focus of your friend’s attention.

With no reason to think the  mother is lacking mental capacity as of now,then putting in place POAs should be a priority ( health and finance )

Does the mother have a will?If not,now is the time for her to make one.

Whether the mum moves closer is a matter for family discussion

If the house is sold the proceeds will in any case fall into the mother’s estate

Whether any eventual estate falls into IHT territory depends on the allowances set out by uknick

Maybe best for your friend to focus for now on what is best for her mother.

Very true, of course the mum is priority. If she can't live by herself, it might be best to sell the house and move her closer. It's important to understand how to handle things financially in view of the future. It can be overwhelming.  

bobster2

Esther63 said:

Very true, of course the mum is priority. If she can't live by herself, it might be best to sell the house and move her closer. It's important to understand how to handle things financially in view of the future. It can be overwhelming.  

If selling - and then buying somewhere for herself that is more appropriate / closer to relatives would be best for her welfare - then of course that's a great idea.

But this has no bearing on inheritance tax.

I'm not sure what you're thinking might avoid IHT? E.g. if she sells the house and gives the proceeds to her children? Where would she live? And in any case, gifts would be included in estate value calculations if she were to die in the next few years.