How to avoid IHT if Labour scraps the residence nil-rate band?

Albermarle

lm1981 said:

I am in very similar situation to the OP and I have been following the news on this with a lot of attention.

There is no news on the subject, just speculation. 

BR5500

lm1981 said:

I am in very similar situation to the OP and I have been following the news on this with a lot of attention.

Good to hear from someone in the same position.

If the IHT thresholds and/or the nil residence are reduced, I'd imagine a lot of people will be mortified. House prices have increased dramatically since 2009 but the IHT threshold has remained the same. If anything, IHT thresholds should be increased in line with house prices rather than reduced.

There have been a lot of articles on IHT in the last few weeks but as has been pointed out previously, all we can do is wait until the supposedly 'painful' budget announcement on 30th October - one thing I can be sure of now though, it won't be painful for any of the people announcing it! 

fuzzzzy

Keep_pedalling said:

It may be possible to use his RNRB now if your parents held their home as tenants in common through a deed of variation passing his share of the house to you so you and your mother became joint owners. This would require a full IHT return to be completed in order to claim the RNRB. If, as is more likely, they held the house as joint tenants then your mother automatically became the sole owner so that won’t be possible.

As it stands your mother’s net worth is well under £650k so a long way from needing either RNRB so this should not be anything to worry about at this time. You certainly should do nothing until the Autumn budget wager we might get an indication on Labour’s plans for IHT.

As the OP has confirmed that their parents were tenants in common on the house deeds would your suggestion of passing on their dad's share of the house to them by way of deed of variation not be the best option? I'm thinking more in regard to future possible care costs than IHT, which I agree is unlikely to be a concern.

lm1981

Is the guess here that the gov won’t likely touch the 325k limit and the other reliefs which allow a married couple to pass on up to 1m to their kids? I am aware that they might go after this but if you had to guess would you say likely that part of IHT wouldn’t be touched?

Emmia

lm1981 said:

Is the guess here that the gov won’t likely touch the 325k limit and the other reliefs which allow a married couple to pass on up to 1m to their kids? I am aware that they might go after this but if you had to guess would you say likely that part of IHT wouldn’t be touched?

This is all straight speculation - no one knows until the budget happens.

BR5500

A few solicitor's websites are speculating on this but I should of course add it's pure speculation - some of them expect the residence nil rate to be dropped completely so that a married couple can only leave 2 x £325k, making a total of £650k. I must stress this is pure speculation though so although it is easier said than done, I guess we just have to stop worrying until the budget at the of October. If your parent's estate is worth more than £650k please do not worry about this at this stage.

I did read somewhere that it is likely that the IHT rate will increase from 40% to 45% but of course this only affects anyone who has to pay IHT in the first place.

Let's hope that that the £1m married couple's limit won't be touched - if it is, it could still well be possible to pass on one parent's half share by way of deed of variation as fuzzzzy has suggested above. This is not something I have looked into myself and hopefully I won't have to. I recall it was in the papers that Ed Miliband used a deed of variation to his father’s will but I haven't come across this method of IHT avoidance elsewhere.

Much richer friends' parents have already passed their properties over to their children, in some cases whilst they were in their early 60s. One friend's parents even sold their large residence and moved into a first time buyer's home to avoid IHT! It's always the way, the people who have done this have ended up living into their late 80s and beyond.

I have occasionally wondered what would happen if my mother put her property into joint names now so that my mother and myself are joint owners of the property - I don't know how this would effect future IHT?

Anyway, I digress but it does feel as though in the very long term, passing on property won't be anywhere near as prevalent as it used to be - the younger generations growing up now are less likely to be able to afford to purchase a property to pass on and IHT limits not reflecting house price rises mean that it will be more and more difficult for current homeowners to fully pass on their properties to their children.

flaneurs_lobster

BR5500 said:

A few solicitor's websites are speculating on this but I should of course add it's pure speculation

Probably not speculative to assume that the solicitors who are speculating are fear-mongering in order to drum up a bit of trust fund setup and property ownership re-assignment business.

lm1981

Agreed it’s all speculation, I’d be disappointed if they touch the 1m limit for married couples to leave to their children. Before they even consider touching that limit they should go after other IHT loop holes like agriculture relief and such like. 

BR5500

flaneurs_lobster said:

BR5500 said:

A few solicitor's websites are speculating on this but I should of course add it's pure speculation

Probably not speculative to assume that the solicitors who are speculating are fear-mongering in order to drum up a bit of trust fund setup and property ownership re-assignment business.

Exactly, that was my immediate reaction to speculation on IHT changes on solicitors' websites. I can imagine some people will be approaching solicitors for advice in advance of the budget but it is far better to wait and see. 

At least being aware of potential changes and watching the budget closely is far better than having our heads in the sand - I can fully understand how some people don't like to think about IHT - it's far better to think about it before the time comes.

Grumpy_chap

BR5500 said:

Much richer friends' parents have already passed their properties over to their children, in some cases whilst they were in their early 60s. One friend's parents even sold their large residence and moved into a first time buyer's home to avoid IHT! It's always the way, the people who have done this have ended up living into their late 80s and beyond.

I have occasionally wondered what would happen if my mother put her property into joint names now so that my mother and myself are joint owners of the property - I don't know how this would effect future IHT?

There are many reasons why transferring property while the donor remains alive is often unwise.  There are many threads where this is discussed.  This quest to avoid a potential future tax quite often results in a certain current tax and, at the same time, fails to avoid the potential future tax or consideration to meet care costs.