Inheritance Tax

CharlieB52

If I leave everything to my wife, I understand that there is no inheritance tax to be paid.

If I leave anything to anyone else as well as my wife does that mean inheritance tax has to be paid on my estate over £325000?

Thanks.

HappyHarry

Only if you leave in excess of £325,000 to anyone else.

Of course, the transferable nil rate band available to your wife’s executors will be reduced.

CharlieB52

Thanks for the quick reply Harry.

So the £325000 nil-rate applies to anything I don't leave to my wife, but is deducted from her nil rate band?

HappyHarry

CharlieB52 said:

Thanks for the quick reply Harry.

So the £325000 nil-rate applies to anything I don't leave to my wife, but is deducted from her nil rate band?

Not from hers, but from the bit her executors claim from you.

Keep_pedalling

You might get a more useful answer if you explain what you are thinking of what proposing to do with your will. For instance if you are thinking of leaving your share of the marital home to your children but giving your wife a life interest then the rules change as that would not use any of your NRB because your wife would have the beneficial interest in our share until her death. 

CharlieB52

HappyHarry said:

CharlieB52 said:

Thanks for the quick reply Harry.

So the £325000 nil-rate applies to anything I don't leave to my wife, but is deducted from her nil rate band?

Not from hers, but from the bit her executors claim from you.

Sorry, I meant from the remainder of my nil-rate band that transfers to her.

Keep_pedalling said:

You might get a more useful answer if you explain what you are thinking of what proposing to do with your will. For instance if you are thinking of leaving your share of the marital home to your children but giving your wife a life interest then the rules change as that would not use any of your NRB because your wife would have the beneficial interest in our share until her death. 

I was planning on leaving some money to the children and everything else to my wife.

Keep_pedalling

CharlieB52 said:

HappyHarry said:

CharlieB52 said:

Thanks for the quick reply Harry.

So the £325000 nil-rate applies to anything I don't leave to my wife, but is deducted from her nil rate band?

Not from hers, but from the bit her executors claim from you.

Sorry, I meant from the remainder of my nil-rate band that transfers to her.

Keep_pedalling said:

You might get a more useful answer if you explain what you are thinking of what proposing to do with your will. For instance if you are thinking of leaving your share of the marital home to your children but giving your wife a life interest then the rules change as that would not use any of your NRB because your wife would have the beneficial interest in our share until her death. 

I was planning on leaving some money to the children and everything else to my wife.

In reality doing that won’t have much of impact on the overall impact of IHT. For instance if your joint net worth is £1M split 50/50 and the you die and leave everything to your wife her estate will be £1M and will be able to use your full NRB, but if you leave £100k to your children the amount transferable will reduce by £100k but her estate will also be £100k lower. 

If you are in a position to do so I would make gifts during your lifetime rather than leave it until you die. Lifetime gifts give you a chance to reduce the IHT liability and you get to see your hard earned put to good use.

CharlieB52

Thanks Keep_pedalling.

I don't think I'll be in the fortunate (unfortunate?) position of being liable for IHT, but I have a better understanding now.