INHERITANCE TAX - WHAT IF WE BOTH DIE TOGETHER?

Moots2024

Firstly, I hope I have put this message in the correct category.

I have watched Martin's useful short video on IHT pointing out that under the current regime few of us will be caught by its net. I believe my wife and I fall into that category. We have both recently retired and a best estimate of our assets (including our house) comes to just over £1million. This includes generous lump sums we each received when retiring, savings and chattels - house value is circa £325k.

Whilst our savings will accumulate interest and so increase the value of our estate we do hope to "enjoy" our retirement by spending funds on holidays and other items that we want to enjoy this serving to reduce the value of the estate.

I have stage 4 lymphoma cancer and so in all likelihood will die well before my wife. For the reasons explained in Martin's video she should then benefit from £1million worth of exemptions re: IHT and so is highly unlikely to be liable to pay any IHT.

But what if we were both to die at the same time in an accident of some kind? Would we each benefit from separate allowances on our share of the estate ultimately adding up to £1million of exemption?

We share everything and have just one daughter and will be leaving everything to her.

Albermarle

But what if we were both to die at the same time in an accident of some kind? Would we each benefit from separate allowances on our share of the estate ultimately adding up to £1million of exemption?

Presumably yes, but wait for others to comment.
Probably worth noting a lot of couples have mirror wills, partly in case of the 'both die in an accident at the same time ' scenario' . However the chances of that actually happening are rather remote apparently.

Keep_pedalling

In the event that you both died in an accident the oldest will be deemed to have died first, and your daughter will not miss out on all the available exemptions.

If you are just over £1M of net worth make sure you and your wife use your annual exempt gift exemption of £3000 every year (if you did not gift last financial year you can also carry that forward), and don’t skimp on yourselves either, make the most of your income and savings to do all the things your want to do while you can. If you want to gift more to your daughter it is probably best if your wife does this as she has more chance of surviving 7 years. 

p00hsticks

Some older wills specify that X will only be the beneficiary if they survive the deceased by 28 days and if they don't it will go directly to the next in line mentioned in the will.

I'm not sure of the reasoning but I think that this wording is no longer generally used / favoured - I think originally the idea was that it would potentially avoid two lots of inheritance tax in quick succession if two deaths occurred close together. Presumably if we are talking husband and wife then this is no longer relevant if they leave everything to each other.  

If the deceased and proposed beneficiary die together in e.g. a traffic accident then it's my understanding that if it isn't medically possible to determine which died first then legally it is taken that the older person pre-deceased the younger, and so the younger spouse's estate would inherit the allowances from the older. 

Keep_pedalling

p00hsticks said:

Some older wills specify that X will only be the beneficiary if they survive the deceased by 28 days and if they don't it will go directly to the next in line mentioned in the will.

I'm not sure of the reasoning but I think that this wording is no longer generally used / favoured - I think originally the idea was that it would potentially avoid two lots of inheritance tax in quick succession if two deaths occurred close together. Presumably if we are talking husband and wife then this is no longer relevant if they leave everything to each other.  

If the deceased and proposed beneficiary die together in e.g. a traffic accident then it's my understanding that if it isn't medically possible to determine which died first then legally it is taken that the older person pre-deceased the younger, and so the younger spouse's estate would inherit the allowances from the older. 

Good point I had forgotten about the 28 day thing which will be a problem if the person deemed to be the first to die has significantly more assets than the second. Probably a good idea to review your wills. 

Moots2024

I'm really grateful for the advices. Very helpful indeed.

Jeremy535897

If your house is worth under £350,000 you won't use all your joint residential nil rate bands.