Best Way to Avoid Inheritance Tax

debbimse

Hi There,

Currently my Nan has left both myself and my sister her property in her will, the property will be worth just over £325,000 when it comes to sell and is fully owned out right.

Any advice on what may be best to do here to avoid the extortionate inheritance tax would be much appreciated.

Would it be best to transfer the house over in to our names now before death (which we hope to be a long time away) so the house will be our property and there for not inherited? Or would we then have to pay more in capital gains than we would inheritance tax, so it may be best leaving it in the will as it is?

Can we also do this just by filling in forms to the land registry, and not have to pay huge solicitor costs if transferring the house over to us is the best option?

Thank you for your help.

user1977

Why do you think the inheritance tax will be "extortionate"? Why do you think your nan doesn't still want to own her house now? How much will the estate be worth in total? How likely is it that your nan will even still own the house by the time she dies? There are no cunning loopholes.

silvercar

At £325k, you need to look at the value of the rest of her estate. If she was married and her husband passed his estate to her then her allowances, including property, could be as much as £1m.

theoretica

Is this/has it ever been her home?  The additional tax free allowance for leaving her residence to descendents may apply.

Is she a widow who inherited from her husband?  Your grandfather's allowances may also be claimable.

DE_612183

Don't forget it's only the value above £325k that you pay tax on - after debts taken into account - and funeral expenses.

kempiejon

debbimse said:

Hi There,

Currently my Nan has left both myself and my sister her property in her will, the property will be worth just over £325,000 when it comes to sell and is fully owned out right.

Any advice on what may be best to do here to avoid the extortionate inheritance tax would be much appreciated.

Would it be best to transfer the house over in to our names now before death (which we hope to be a long time away) so the house will be our property and there for not inherited? Or would we then have to pay more in capital gains than we would inheritance tax, so it may be best leaving it in the will as it is?

Can we also do this just by filling in forms to the land registry, and not have to pay huge solicitor costs if transferring the house over to us is the best option?

Thank you for your help.

Extortion is obviously illegal and to be avoided. But tax is to be paid. It's part of the contract we have with the society we live in. So moving gran's assets overseas would be a good way to get out of UK tax jurisdiction.

Transferring to avoid tax, possible care fees or just because you want the old girl's money really isn't on. Wouldn't there be tax to pay on the transfer of the house anyway and do you have the money to buy it?

Check the details but as currently the nil rate band is £325000 with an extra £175000 for main properties owned outright and passed to civil partners, spouses, and most kids, adopted, fostered, step and grand if the total estate is less than £2M so you might be OK anyhow.

Brie

There's currently no IHT on an estate up to £325k just the amount over that.  So if the total estate is £350k there's only tax on £25k so "just" £10k to be paid.  Obviously this is a problem if there's no cash in the estate to pay for this and you and sis need to fund it or sell the house.

But as user1977 has said there's no way of knowing now if Nan will even own the house when the whole thing becomes relevant.  

theartfullodger

Best way to avoid IHT??? Easy, people should ensure their assets are below the threshold.  So give it away to get those assets down! And utilise gift aid (thank you gordon brown) for all charity donations.

DE_612183

or spend it all before you die - that's my plan

FreeBear

kempiejon said:

debbimse said:

Hi There,

Currently my Nan has left both myself and my sister her property in her will, the property will be worth just over £325,000 when it comes to sell and is fully owned out right.

Any advice on what may be best to do here to avoid the extortionate inheritance tax would be much appreciated.

Would it be best to transfer the house over in to our names now before death (which we hope to be a long time away) so the house will be our property and there for not inherited? Or would we then have to pay more in capital gains than we would inheritance tax, so it may be best leaving it in the will as it is?

Can we also do this just by filling in forms to the land registry, and not have to pay huge solicitor costs if transferring the house over to us is the best option?

Thank you for your help.

Extortion is obviously illegal and to be avoided. But tax is to be paid. It's part of the contract we have with the society we live in. So moving gran's assets overseas would be a good way to get out of UK tax jurisdiction.

That doesn't work. You may find inheritance tax being levied in the overseas jurisdiction and at home, so ending up paying twice.

debbimse

Thank you everyone for your replies, it is much appreciated.

We are thinking about this in a positive way for now that she will own her own home at the time of death, we are a close family and she will be looked after by us in our homes when the time comes, she won't be made to go in to a home for example (she is 90 currently) and would continue living with us and we would care for her / get carers if needed, so we don't feel there is any reason the home would not be hers at the time of death. Of course many things can happen, but we are just looking for some advice on the here and now as she is worried regarding us paying a lot of tax on the house (this is purely just to settle her worries).

She has lived in the home and is still living in it, for 30 years, it was her and her husbands, he died and now the house is fully her own. 

She has no debts and her funeral is already paid for.

She does not have much else in her estate, no large some of money or expensive items, it is purely only the house.

The reason we thought it would be extortionate is because i did not realise there was a tax free amount of £325,000, so learning that info has been really helpful thank you ( we had in our minds we would be paying 40% on the full amount.. )

So say the house did sell for £335,000 for example, both myself and my sister would be full owners of the hours, we would need to pay inheritance tax on the £10,000 only which would be about £4,000 - Would paying capital gains tax be more than this if she was to transfer it in to our name now?

Again this isn't a wish of ours, so no we do not want to get "the old gals money" but she is worrying about things after seeing updates on the news regarding the new government, we are quite clueless, so just want to give her any info we could find.

Thank you.