£325k on Inheritance Tax, if going to two children do you need to pay?

Poshsalt

Hi,

I see Labour will be changing the inheritance tax.

My mum lives in a £500k house, her will says it will go to myself and my brother we would get 50% each of the house £250k each, so would that hit the over £325k is that how it works? Its because the value is over £325k is it automatically gets hit no matter how many members of family are on the will?

Regards

mybestattempt

Poshsalt said:

Hi,

I see Labour will be changing the inheritance tax.

My mum lives in a £500k house, her will says it will go to myself and my brother we would get 50% each of the house £250k each, so would that hit the over £325k is that how it works? Its because the value is over £325k is it automatically gets hit no matter how many members of family are on the will?

Regards

At the moment it's the whole value of your mother's estate at date of death which matters for establishing it Inheritance Tax is due.

The threshold may be £500000 as the house is left to you and your brother and could possibly be more if she is a widow who inherited from her late spouse.

This may be helpful to your understanding of Inheritance Tax:

https://www.gov.uk/inheritance-tax

Grumpy_chap

Poshsalt said:

I see Labour will be changing the inheritance tax.

Where did you see that?
I was not aware that anything had been announced.
Speculation in the tabloid press may not reflect what the Government actually plan.

Keep_pedalling

You really need to stop believing stuff you read on the internet. Undoubtedly there will be changes to taxation but what those changes are not known and statements about changes to IHT are just speculation.

As it stands her NRB and RNRB provides exemptions totalling £500k, but if she is a widow it could be up to double that.

As an aside, it is bad practice to actually to specify a property in a will as there is a reasonable chance you may not own by the time you die and it is possible to accidentally disinherit someone.  

Grumpy_chap

The OP should remember that IHT is paid by the Estate before the distribution.

The Estate value now may be higher or lower by the time Mum passes on - she might blow it all on a fast car and luxury cruises, she might spend it on something essential (care costs), she might gamble it all on a lottery ticket and be £100M richer by the weekend.

Albermarle

Keep_pedalling said:

You really need to stop believing stuff you read on the internet. Undoubtedly there will be changes to taxation but what those changes are not known and statements about changes to IHT are just speculation.

As it stands her NRB and RNRB provides exemptions totalling £500k, but if she is a widow it could be up to double that.

As an aside, it is bad practice to actually to specify a property in a will as there is a reasonable chance you may not own by the time you die and it is possible to accidentally disinherit someone.  

I understand the logic behind this ( the home might have to be sold to pay for care costs for example),
I presume that even though the house is not named in the will, the fact that it is part of the assets that will be split 50:50 to her two children, will still mean the £175K Residence nil rate band still applies? ( or £350K if her husband pre deceased her) 

Keep_pedalling

Albermarle said:

Keep_pedalling said:

You really need to stop believing stuff you read on the internet. Undoubtedly there will be changes to taxation but what those changes are not known and statements about changes to IHT are just speculation.

As it stands her NRB and RNRB provides exemptions totalling £500k, but if she is a widow it could be up to double that.

As an aside, it is bad practice to actually to specify a property in a will as there is a reasonable chance you may not own by the time you die and it is possible to accidentally disinherit someone.  

I understand the logic behind this ( the home might have to be sold to pay for care costs for example),
I presume that even though the house is not named in the will, the fact that it is part of the assets that will be split 50:50 to her two children, will still mean the £175K Residence nil rate band still applies? ( or £350K if her husband pre deceased her) 

Yes, the wording in the will has no impact on the ability to claim the RNRB as long as it does not have a clause that leaves the house to someone other than direct descendants of the testator.