Clarification of Advice on Government website.

clarzier

Daniel54 said:

Granting of probate does not hinder a deed of variation - the only constraint is the two year gap from date of death

However as Keep Pedalling has said, from the information provided his estate will fall well below IHT territory after the allowances of approx £800k ,so gifting £40k now will in any case not give rise to any potential IHT liabilities.

Thank you for your advice. I'm a bit confused as you mention allowances for IHT liabilities but HMRC calculator does say that he will have to pay IHT when he passes away. All his money and property has been left to estate upon death for his executors to sort out. His Deceased spouse had a mirror will 

Daniel54

Assuming no other bequests in the mirror wills,then the surviving husband’s estate can apply the late wife’s full unused IHT allowance of £325,000 as well as his own allowance of the same amount.On top of that his estate will benefit from a residential nil rate band adding in the property value if left to direct descendants up to £350k

.So £650k plus £160k = £810k free of IHT 

Flugelhorn

If the wife left 100K of her own then it is possible that this is a large estate, the first to die of a couple rarely leaves much other than that jointly owned.
Is the property very valuable and hence the IHT you are anticipating having to pay? 

clarzier

The 100k was in the sole name of the Deceased.  The wills state that upon their death everything transfers to the other but should upon the death of the surviving spouse then all monies and property is given to the the estate for the executors to split into 3 - 1/3 for each child, and 1/3 to be split between however many grandchildren there will be a time of death.

RAS

If the £100k was in the sole name of the deceased and everything was transferred to the other spouse, where did the £40k come from?

clarzier

RAS said:

If the £100k was in the sole name of the deceased and everything was transferred to the other spouse, where did the £40k come from?

They want to gift us 40k from the 100k that was in the sole name of the deceased

Keep_pedalling

Can you clarify a couple of things please.

is the £100k inheritance from her husband or someone else?

You say the house is worth over £160k, how much over £160k.

tetrarch

clarzier said:

They want to gift us 40k from the 100k that was in the sole name of the deceased

 It is confusing when you use this language as "gift" has a particular meaning when dealing with HMRC.

A gift is a monetary transfer within the lifetime of a giver and has consequences. Money "gifted" has an IHT implication for the "Giver"

Per HMRC:

Rules on giving gifts

Inheritance Tax may have to be paid after your death on some gifts you’ve given.

Gifts given less than 7 years before you die may be taxed depending on:

• who you give the gift to and their relationship to you
• the value of the gift
• when the gift was given

But.....

When someone dies there is an opportunity (but only for two years) for a beneficiary under a will (or if intestate) to transfer some of their inheritance to another person without any "Gifting" restrictions. This is the Deed of Variation described above. What you are effectively doing is redirecting some of the estate to others. In your instance, effectively creating two bequests of £20,000

Regards

Tet

clarzier

Keep_pedalling said:

Can you clarify a couple of things please.

is the £100k inheritance from her husband or someone else?

You say the house is worth over £160k, how much over £160k.

Approx 180-187k but as you know houses prices can fluctuate. The 100k is what the deceased had in her sole name and was transferred to the surviving spouse once probate was finalised.

Keep_pedalling

clarzier said:

Keep_pedalling said:

Can you clarify a couple of things please.

is the £100k inheritance from her husband or someone else?

You say the house is worth over £160k, how much over £160k.

Approx 180-187k but as you know houses prices can fluctuate. The 100k is what the deceased had in her sole name and was transferred to the surviving spouse once probate was finalised.

That that confirms his estate is well within his IHT exemption, but more importantly that his inheritance came from his wife. Inheritance from a spouse is covered by spousal exemption which makes a deed of variation inappropriate as it will just reduce the transferable NRB by an equal amount.

Your father should just make the gifts in a single lump sum.