Inheritance Tax and gifting/loaning money

Keep_pedalling

squidlydiddly2 said:

Marcon said:

squidlydiddly2 said:

In my 80th year my thought processes are not as good as they were so I need monetary advice please! My wife is 75, our only child a son is 48 and lives in Austria with his partner. They have no children and no plans to marry. Our wills state each partner inherits on the death of the other with our son as eventual sole beneficiary, the estate going to a hospice should he not be alive. Our property is in trust to our son and this was done in 2014.
He had our help to buy a property in this country in 2009 when we signed a paper saying it was a gift not a loan and also further help to sell that property and buy one in Austria for which we signed nothing. With the 7 year rule most of the money is in the nil rate for tax but about £130,000 is between 3-5yrs. We would now like to help him purchase a bigger property in Austria.
My question is about inheritance tax at £325,000. I estimate our estate, taking everything into consideration, but excluding possible care costs, to be around £700,000 of which our house is £450,000 and as far as I can ascertain we are tenants in common.
I understand when one partner dies the other inherits free of IHT but what happens when the other dies with the estate still worth the same, is everything over the single threshold taxed at 40%? Is it best now as a couple to gift or loan our son further money in the hope that one or both of us survives another 7 years? Advice would be very welcome.

If you don't even know if you and your wife are tenants in common, it sounds as if there's a bit of basic groundwork to be done. Probably best to get some proper professional advice, given this is fairly complicated. This would give you and your wife (and your son) extra peace of mind. 

Marcon said:

km1500 said:

as you are married then you each have an IHT-free allowance of 325k. in addition as you're leaving your estate to a direct descendence (i.e your son) then you have an extra 175k so total of 500k each

on the death of the first partner their 500k gets transferred to the second partner so when they eventually die there will be one million pounds IHT-free to leave to your son

The snag is that OP wouldn't be leaving it to his son if the trust set up in 2014 was a  discretionary trust - so no nil rate residential band available to either OP or wife, IF that's the case. Another vital point to check - and it's hard to see how the ownership of the property can be tenants in common if it's already in trust. It's impossible to know for sure from the post quite what the status of the trust is, albeit the intention is that the son inherits.

I can only repeat my previous suggestion that some professional help is needed here, and possibly quite urgently.

I believed at the time that if you have a discretionary trust the family were tenants in common. I really am grateful to you for your comments and will urgently take further advice. Would you seek a solicitors advice or an accountant’s in this instance?

Marcon said:

squidlydiddly2 said:

In my 80th year my thought processes are not as good as they were so I need monetary advice please! My wife is 75, our only child a son is 48 and lives in Austria with his partner. They have no children and no plans to marry. Our wills state each partner inherits on the death of the other with our son as eventual sole beneficiary, the estate going to a hospice should he not be alive. Our property is in trust to our son and this was done in 2014.
He had our help to buy a property in this country in 2009 when we signed a paper saying it was a gift not a loan and also further help to sell that property and buy one in Austria for which we signed nothing. With the 7 year rule most of the money is in the nil rate for tax but about £130,000 is between 3-5yrs. We would now like to help him purchase a bigger property in Austria.
My question is about inheritance tax at £325,000. I estimate our estate, taking everything into consideration, but excluding possible care costs, to be around £700,000 of which our house is £450,000 and as far as I can ascertain we are tenants in common.
I understand when one partner dies the other inherits free of IHT but what happens when the other dies with the estate still worth the same, is everything over the single threshold taxed at 40%? Is it best now as a couple to gift or loan our son further money in the hope that one or both of us survives another 7 years? Advice would be very welcome.

If you don't even know if you and your wife are tenants in common, it sounds as if there's a bit of basic groundwork to be done. Probably best to get some proper professional advice, given this is fairly complicated. This would give you and your wife (and your son) extra peace of mind. 

I believed at the time that if you have a discretionary trust the family were tenants in common. I really am grateful to you for your comments and will urgently take further advice. Would you seek a solicitors advice or an accountant’s in this instance?

Keep_pedalling said:

Marcon said:

km1500 said:

as you are married then you each have an IHT-free allowance of 325k. in addition as you're leaving your estate to a direct descendence (i.e your son) then you have an extra 175k so total of 500k each

on the death of the first partner their 500k gets transferred to the second partner so when they eventually die there will be one million pounds IHT-free to leave to your son

The snag is that OP wouldn't be leaving it to his son if the trust set up in 2014 was a  discretionary trust - so no nil rate residential band available to either OP or wife, IF that's the case. Another vital point to check - and it's hard to see how the ownership of the property can be tenants in common if it's already in trust. It's impossible to know for sure from the post quite what the status of the trust is, albeit the intention is that the son inherits.

I can only repeat my previous suggestion that some professional help is needed here, and possibly quite urgently.

Yes I missed that bit in the opening post, definitely no RNRB available , but as this was a gift with reservation of benefit the 7 year rule does not apply and the house still sits in the OPs estate. The double whammy is that CGT comes into play here as well and this could make unwinding the traits and reverting ownership back to the OP an expensive exercise. 

I really am grateful to you for your comments and will urgently take further advice. Would you seek a solicitors advice or an accountant’s in this instance?

A solicitor, preferable a STEP solicitor who is an expert on trust law.

Marcon

squidlydiddly2 said:

Marcon said:

squidlydiddly2 said:

In my 80th year my thought processes are not as good as they were so I need monetary advice please! My wife is 75, our only child a son is 48 and lives in Austria with his partner. They have no children and no plans to marry. Our wills state each partner inherits on the death of the other with our son as eventual sole beneficiary, the estate going to a hospice should he not be alive. Our property is in trust to our son and this was done in 2014.
He had our help to buy a property in this country in 2009 when we signed a paper saying it was a gift not a loan and also further help to sell that property and buy one in Austria for which we signed nothing. With the 7 year rule most of the money is in the nil rate for tax but about £130,000 is between 3-5yrs. We would now like to help him purchase a bigger property in Austria.
My question is about inheritance tax at £325,000. I estimate our estate, taking everything into consideration, but excluding possible care costs, to be around £700,000 of which our house is £450,000 and as far as I can ascertain we are tenants in common.
I understand when one partner dies the other inherits free of IHT but what happens when the other dies with the estate still worth the same, is everything over the single threshold taxed at 40%? Is it best now as a couple to gift or loan our son further money in the hope that one or both of us survives another 7 years? Advice would be very welcome.

If you don't even know if you and your wife are tenants in common, it sounds as if there's a bit of basic groundwork to be done. Probably best to get some proper professional advice, given this is fairly complicated. This would give you and your wife (and your son) extra peace of mind. 

Marcon said:

km1500 said:

as you are married then you each have an IHT-free allowance of 325k. in addition as you're leaving your estate to a direct descendence (i.e your son) then you have an extra 175k so total of 500k each

on the death of the first partner their 500k gets transferred to the second partner so when they eventually die there will be one million pounds IHT-free to leave to your son

The snag is that OP wouldn't be leaving it to his son if the trust set up in 2014 was a  discretionary trust - so no nil rate residential band available to either OP or wife, IF that's the case. Another vital point to check - and it's hard to see how the ownership of the property can be tenants in common if it's already in trust. It's impossible to know for sure from the post quite what the status of the trust is, albeit the intention is that the son inherits.

I can only repeat my previous suggestion that some professional help is needed here, and possibly quite urgently.

I believed at the time that if you have a discretionary trust the family were tenants in common. I really am grateful to you for your comments and will urgently take further advice. Would you seek a solicitors advice or an accountant’s in this instance?

Marcon said:

squidlydiddly2 said:

In my 80th year my thought processes are not as good as they were so I need monetary advice please! My wife is 75, our only child a son is 48 and lives in Austria with his partner. They have no children and no plans to marry. Our wills state each partner inherits on the death of the other with our son as eventual sole beneficiary, the estate going to a hospice should he not be alive. Our property is in trust to our son and this was done in 2014.
He had our help to buy a property in this country in 2009 when we signed a paper saying it was a gift not a loan and also further help to sell that property and buy one in Austria for which we signed nothing. With the 7 year rule most of the money is in the nil rate for tax but about £130,000 is between 3-5yrs. We would now like to help him purchase a bigger property in Austria.
My question is about inheritance tax at £325,000. I estimate our estate, taking everything into consideration, but excluding possible care costs, to be around £700,000 of which our house is £450,000 and as far as I can ascertain we are tenants in common.
I understand when one partner dies the other inherits free of IHT but what happens when the other dies with the estate still worth the same, is everything over the single threshold taxed at 40%? Is it best now as a couple to gift or loan our son further money in the hope that one or both of us survives another 7 years? Advice would be very welcome.

If you don't even know if you and your wife are tenants in common, it sounds as if there's a bit of basic groundwork to be done. Probably best to get some proper professional advice, given this is fairly complicated. This would give you and your wife (and your son) extra peace of mind. 

I believed at the time that if you have a discretionary trust the family were tenants in common. I really am grateful to you for your comments and will urgently take further advice. Would you seek a solicitors advice or an accountant’s in this instance?

Keep_pedalling said:

Marcon said:

km1500 said:

as you are married then you each have an IHT-free allowance of 325k. in addition as you're leaving your estate to a direct descendence (i.e your son) then you have an extra 175k so total of 500k each

on the death of the first partner their 500k gets transferred to the second partner so when they eventually die there will be one million pounds IHT-free to leave to your son

The snag is that OP wouldn't be leaving it to his son if the trust set up in 2014 was a  discretionary trust - so no nil rate residential band available to either OP or wife, IF that's the case. Another vital point to check - and it's hard to see how the ownership of the property can be tenants in common if it's already in trust. It's impossible to know for sure from the post quite what the status of the trust is, albeit the intention is that the son inherits.

I can only repeat my previous suggestion that some professional help is needed here, and possibly quite urgently.

Yes I missed that bit in the opening post, definitely no RNRB available , but as this was a gift with reservation of benefit the 7 year rule does not apply and the house still sits in the OPs estate. The double whammy is that CGT comes into play here as well and this could make unwinding the traits and reverting ownership back to the OP an expensive exercise. 

I really am grateful to you for your comments and will urgently take further advice. Would you seek a solicitors advice or an accountant’s in this instance?

Probably starting with a solicitor is the best bet and as someone else has suggested, a STEP member could be useful given there seems to be some complexity in your estate: https://www.step.org/about-step/public