Help please, is this legal?

BungalowBel

HappyHarry said:

BungalowBel said:

Thank you for your replies.  The seven year-inheritance tax thing was what I was thinking of.  I don't know whether our estate will be above the IHT threshold.  We have a bungalow worth around £220k plus (after selling the flat and spending  some of the money) around £150k in savings.

I suppose we will both have to arrange not to die for seven years!  (we are 74 and 75).  

Thank you all for our help, I think we will do it anyway.  We will be liable for CGT but we knew that.

Please can someone answer my husband's question about money laundering, just so I can set his mind at rest?  Thanks!

From those figures your estate will be free of inheritance tax, so you have no concerns on that score.

Your Nil Rate Band = £325,000
Husband's Nil Rate Band = £325,000

So you will get £650,000 just from these two Nil Rate Bands which covers your estate.

Your estate may also benefit from up to £220,000 in Residence Nil Rate Bands depending on whether or not you live in the flat and who it is owned by.

Thankyou.  We have never lived in the flat, it has always been tenanted since we bought it in 2016.

Our bungalow where we live  is owned as tenants-in -common (has been ever since we bought it in 2015)  and our son inherits half in trust upon the first death, then the second half on the second death, when the trust will be wound up. Everything else , apart from a few minor bequests to Charities, goes to the surviving spouse on the first death.

Thank you so much for your advice.

Brie

Isn't there a tapering of IHT for gifts so that each year less tax might be paid by the estate?  So full amount in year one, 6/7 in year two etc.

MWT

Brie said:

Isn't there a tapering of IHT for gifts so that each year less tax might be paid by the estate?  So full amount in year one, 6/7 in year two etc.

Taper relief only applies if the total value of gifts made in the 7 years before you die is over the £325,000 tax-free threshold.

35har1old

BungalowBel said: of the funds

Thank you all, that is so helpful, much appreciated.

The bank may also ask the source of funds

BungalowBel

35har1old said:

BungalowBel said: of the funds

Thank you all, that is so helpful, much appreciated.

The bank may also ask the source of funds

Thanks, if they do, we will provide the evidence.

user1977

HappyHarry said:

BungalowBel said:

The other question  wanted to ask is - my husband said the mortgage company might ask where the money has come from.  Of course it will have been come by legally, and we will be able to provide proof if necessary,  but will it make any difference if it is a gift to our son?  My husband  seems to think it might be classed as money laundering!  I'm sure he is wrong, but just want to check.

The mortgage company may well ask you and your husband to sign a legal document stating that this is a gift to your son rather than a loan.

Why would they care about that? Other than perhaps verifying that it isn't "dirty" money, I don't see why the lender would be bothered about who it's come from or whether it's a loan.

After all, when mortgages are redeemed the money is normally from selling the property, or from a new mortgage, or from your savings account - but the lender doesn't normally know, or ask, where you've got it from.

user1977

BungalowBel said:

I suppose we will both have to arrange not to die for seven years!  (we are 74 and 75).  

People do tend to get confused about this. Lifetime gifts do not increase the amount of tax you pay, at worst they just won't decrease the amount of Inheritance Tax. After all, if you don't make the gift (or spend the money!) then it will still be in your bank when you die and will definitely form part of your estate.

The rule just means that you can't avoid inheritance tax by doing the equivalent of giving away your estate on your deathbed.

HappyHarry

user1977 said:

HappyHarry said:

BungalowBel said:

The other question  wanted to ask is - my husband said the mortgage company might ask where the money has come from.  Of course it will have been come by legally, and we will be able to provide proof if necessary,  but will it make any difference if it is a gift to our son?  My husband  seems to think it might be classed as money laundering!  I'm sure he is wrong, but just want to check.

The mortgage company may well ask you and your husband to sign a legal document stating that this is a gift to your son rather than a loan.

Why would they care about that? Other than perhaps verifying that it isn't "dirty" money, I don't see why the lender would be bothered about who it's come from or whether it's a loan.

After all, when mortgages are redeemed the money is normally from selling the property, or from a new mortgage, or from your savings account - but the lender doesn't normally know, or ask, where you've got it from.

  My bad. I had thought the son was looking to take out a new mortgage. @user1977 is quite right, as the son is just paying off his existing mortgage it matters not where the funds have come from.

BungalowBel

Thanks, I have only just seen the additional posts.  Very helpful.