Inheritance tax thoughts

Keep_pedalling

Dinloo said:

Further to this. If I was to marry and I die first iht allowance is 1m. What happens when my say wife dies is iht still 1m or is the surviving person’s allowance set back to a single persons 325. Thanks

Anything passing to a spouse either absolutely or via a IPDIT is exempt and your NRBs can be transferred to her estate but you partner can only use her RNRB if she has children of her own to leave some of her estate to. If she has no children of her own your joint exemptions can’t be higher than £825k.

Malthusian

Dinloo said:

Thanks all. Marriage is not really an option or not at this time. It also brings in things like divorce etc and the complexities that go with that. 

If you are not willing to risk sharing 50% of your assets with your partner (with the same applying to them) you have to face up to losing 40% of your assets over the nil rate bands to the taxman. That is the quid pro quo of the marriage system.

Hopefully I’ve another 10-15 yrs ahead of me and I do plan to spend savings living life. If I get ill, then marriage might be the then solution but does that not then shift an inheritance issue to my partner/wife when they die (that is if I go first). 

I'm not seeing what the issue is. Is it a bigger issue than having to pay Inheritance Tax to HMRC and potentially having to sell the house to pay the bill?

Some kind of trust for the house needs to be researched so what type of trust is considered for homes thanks.

As KP said, if you want your partner to be able to live in the house after your death but still ensure your children benefit at some point, the usual solution is a life interest trust.

Be aware that if you leave the property to a life interest trust and you are not married on death, there can be a double inheritance tax charge. IHT would apply on your death because there is no spousal exemption, and there could be a second charge to IHT on the partner's death, even though the property was not their own. The usual solution is to get married. Or just leave the property directly to the children, and let them give your partner the boot when you die. 

Further to this. If I was to marry and I die first iht allowance is 1m. 

No, it's £500,000 including the residence nil rate band, but the spousal exemption applies on anything you left to your partner. It would also apply to assets left to a life interest trust with them as the life interest.

What happens when my say wife dies is iht still 1m or is the surviving person’s allowance set back to a single persons 325. Thanks

You would inherit any unused allowance. So if they left their entire estate to you on the first death, they would not have used any of your allowance and you would have 2x nil rate bands and 2x residence nil rate bands, for a total of £1 million. 

Dinloo

Thanks all. Looks like I might need to consider marriage 🤔 

Daniel54

Civil Partnership is deemed equivalent to marriage for IHT purposes 

Dinloo

Another question for clarity. My current will has my estate split between my 2 children and partner 1/3 each. Would that decrease the residence 175k by a third on my death if things remain as they are. Ta

Malthusian

Dinloo said:

Another question for clarity. My current will has my estate split between my 2 children and partner 1/3 each. Would that decrease the residence 175k by a third on my death if things remain as they are. Ta

If the house is worth at least £262,500 and everything in the estate is being split that way, you would use up all of it. Because at least £175,000 of the house would be passing to direct descendants.

Your estate is c. £750,000, no spousal exemptions apply, your executors claim the £175,000 residence nil rate band and £325,000 nil rate band, the other £250,000 is subject to 40% Inheritance Tax, which your executors would need to pay before probate was granted.

The value of the share of the residence passing to direct descendants is what matters.

As you are not married if things remain as they are, any RNRB not used on your death would be wasted.

Dinloo

Thanks for that info. As the house is worth more than 262,500 all is good on that front then. I was seeing it as a share thing rather than an amount 👍.  So many aspects and side roads to get my head round so good decision making is made.

MarzipanCrumble

Look at Vitality for LA.  Earning (health) points reduces the premium.  So I walk 10k paces in a day I get points;  I go to dentist/eye exam I get points etc.

It really depends on you health and your age.