Inheritance tax advice??

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Comments

  • Keep_pedalling
    Keep_pedalling Posts: 16,602 Forumite
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    bobster2 said:
    As many have pointed out - this was unwise - particularly since the person concerns owns a rental property which means the estate could be getting into IHT territory.

    But it could have been worse...the reservation of benefit might mean the RNRB can be used after all...

    https://techzone.abrdn.com/public/iht-est-plan/residence-nil-rate-band-guide
    If the home is gifted but the owner still lives there rent free, this is normally a gift with reservation of benefit (GWR). A person’s estate on death includes the value of property subject to a reservation of benefit (GWR). For the purposes of the RNRB the gift is still regarded as a transfer on death and therefore eligible for the RNRB, provided the home goes to direct descendants.

    I think they should take advice on this, as as soon she moves out she no longer has a beneficial interest and the 7 year clock starts and the downsizing rules comes into effect, which say 

    The downsizing addition is available where:

    • the deceased sold, gave away or downsized their home after 7 July 2015,
    • the former home would have qualified for the RNRB if it had been retained until death, and
    • direct descendants inherit at least part of the estate, provided other assets in the estate are of an equivalent value to the “lost” RNRB.
    So if she had to move into care and died within 7 years and have given the home away before the above date (not 2017 as I said in my previous post) it would not be claimable. 
  • Macka09
    Macka09 Posts: 48 Forumite
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    Marcon said:
    Macka09 said:
    It certainly wasn’t someone from down the pub who advised them. From my understanding, at least 2 paid professionals advised them that this would be the best way to do things. 

    I believe the house to be worth £220k at this current time. It would have been handed over before the 2017 date. 

    One of the reasons for this route being taken is because the elderly mother was left another property which is rented out and her own house was then gifted to the daughter. 

    The elderly mother is a widow of 20 years but I’m unsure whether that has any bearing on anything. 

    They’ve completely lost trust with the tax advisors and solicitors and don’t know where to turn to. 
    What a mess. It's hard to believe that one qualified and experienced adviser could come up with such a pig's ear of an outcome, let alone two. Something doesn't add up here, and I don't just mean the tax! I wonder exactly what these advisers were told/asked to achieve - for instance, did a discussion about avoiding possible care home fees feature...? Has she gone back to them to challenge their advice, based on her new level of understanding?

    Has the mother ever lived in the house which is rented out? Did she inherit 'everything' when her husband died 20 years ago (ie none of his nil rate band was used)? Is the rental property classed as her main residence, or has it ever been classed as such?
    I believe they are going back to their advisors to try and sort it all out. 

    Unfortunately they have no understanding of any of it, so they really are at the mercy of the advisors. 

    £350ph is what they’re being charged for consultation. 

    The mother(80yo) has never lived in the property that was gifted to her, that is rented out. The house she resides in was the home that she lived in with her husband annd still resides in and has now on advice gifted to her daughter. 

    It’s all a big mess but it seems like they’re being led down the garden path for whatever reason. 
  • Mojisola
    Mojisola Posts: 35,557 Forumite
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    Macka09 said:
    I believe they are going back to their advisors to try and sort it all out. 
    I hope they are different advisors to the ones who gave them the original advice!

  • Keep_pedalling
    Keep_pedalling Posts: 16,602 Forumite
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    Macka09 said:
    Marcon said:
    Macka09 said:
    It certainly wasn’t someone from down the pub who advised them. From my understanding, at least 2 paid professionals advised them that this would be the best way to do things. 

    I believe the house to be worth £220k at this current time. It would have been handed over before the 2017 date. 

    One of the reasons for this route being taken is because the elderly mother was left another property which is rented out and her own house was then gifted to the daughter. 

    The elderly mother is a widow of 20 years but I’m unsure whether that has any bearing on anything. 

    They’ve completely lost trust with the tax advisors and solicitors and don’t know where to turn to. 
    What a mess. It's hard to believe that one qualified and experienced adviser could come up with such a pig's ear of an outcome, let alone two. Something doesn't add up here, and I don't just mean the tax! I wonder exactly what these advisers were told/asked to achieve - for instance, did a discussion about avoiding possible care home fees feature...? Has she gone back to them to challenge their advice, based on her new level of understanding?

    Has the mother ever lived in the house which is rented out? Did she inherit 'everything' when her husband died 20 years ago (ie none of his nil rate band was used)? Is the rental property classed as her main residence, or has it ever been classed as such?
    I believe they are going back to their advisors to try and sort it all out. 

    Unfortunately they have no understanding of any of it, so they really are at the mercy of the advisors. 

    £350ph is what they’re being charged for consultation. 

    The mother(80yo) has never lived in the property that was gifted to her, that is rented out. The house she resides in was the home that she lived in with her husband annd still resides in and has now on advice gifted to her daughter. 

    It’s all a big mess but it seems like they’re being led down the garden path for whatever reason. 
    What is the value of the second property and what other assets does she have? 

    It is quite possible that her estate will not drop into IHT territory, so spending £350 ph ( plus VAT I presume) may just be more wasted money. If they do need professional advice I would be looking elsewhere to get it.  
  • Macka09
    Macka09 Posts: 48 Forumite
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    The other property is about £280k. Other than cash in the bank their are no other assets. 
  • Keep_pedalling
    Keep_pedalling Posts: 16,602 Forumite
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    Macka09 said:
    The other property is about £280k. Other than cash in the bank there are no other assets. 
    Well the good news is that even with the gift remaining in her estate it looks to be well below £650k so is an excepted estate, so no IHT and no IHT return to do, so really no action needs to be taken as the only impact will be CGT for the child which is now unavoidable, unless they decide to move in and use it as their home rather than sell it.

    The big question though, is why did those advisors even think IHT was ever an issue in the first place?  I certainly would not be looking to pay them any more fees for useless advice, 
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