Help for beneficiaries to pay IHT

Boleyn19

Thinking hopefully a long way ahead. I am 65 and my husband 75. Our estate will be IHT liable mostly in property but also savings and my SIPP. If my husband goes first he wants to leave our sons up to the threshold limit. If I go first it all goes to him with some left to our sons.

Whoever goes last there will be a large IHT bill to pay, unless we need it for care or go on worldwide cruises, before probate can be granted. We need to make sure we have money to pay care home fees so can’t gift large amounts with the 7 year rule. 

How can we set help our sons to pay the IHT without crippling loans?

Thanks in advance.

Keep_pedalling

If you leave a large estate which is tied up in illiquid assets such as property you are going to have issues with paying IHT within 6 months, however the executors don’t need to take out a massive loan as HMRC allow you to pay by instalment so the immediate requirement will be for 10% of the IHT liability so as long as you leave sufficient liquid assets to cover that there will be no need for a loan.

poseidon1

Given the age disparity  and assuming reasonable state of health, whole of life insurance ( joint life 2nd death) written in trust, could also be a possible option depending on how much you can afford.

The subject was raised in the thread below, and may well be of interest to more couples with the future loss of IHT protection Sipps currently enjoy.

This, in conjunction with the instalment option mentioned by Keep_pedalling would give your sons options and a degree of liquidity in dealing with IHT when the time comes The policy in trust should ensure speedy payment of the policy proceeds without having to wait for probate. This is an ' old school' method of IHT funding which just might regain some popularity.

https://forums.moneysavingexpert.com/discussion/6563164/life-insurance-for-married-couple-to-mitigate-iht#latest

Boleyn19

Keep_pedalling said:

If you leave a large estate which is tied up in illiquid assets such as property you are going to have issues with paying IHT within 6 months, however the executors don’t need to take out a massive loan as HMRC allow you to pay by instalment so the immediate requirement will be for 10% of the IHT liability so as long as you leave sufficient liquid assets to cover that there will be no need for a loan.

What are liquid assets that can be passed to beneficiaries or direct to HMRC before probate is granted?

Keep_pedalling

Boleyn19 said:

Keep_pedalling said:

If you leave a large estate which is tied up in illiquid assets such as property you are going to have issues with paying IHT within 6 months, however the executors don’t need to take out a massive loan as HMRC allow you to pay by instalment so the immediate requirement will be for 10% of the IHT liability so as long as you leave sufficient liquid assets to cover that there will be no need for a loan.

What are liquid assets that can be passed to beneficiaries or direct to HMRC before probate is granted?

Cash mainly. Banks have quite large limits to the amount held with them that they will pay out without obtaining probate first, for instance with Barclays as long as you don’t hold more than £50k with them they will pay it out to the executor on production of the will and proof of identity. If the amount held does require probate backs will pay direct to HMRC under the direct payment scheme.

Boleyn19

Keep_pedalling said:

Boleyn19 said:

Keep_pedalling said:

If you leave a large estate which is tied up in illiquid assets such as property you are going to have issues with paying IHT within 6 months, however the executors don’t need to take out a massive loan as HMRC allow you to pay by instalment so the immediate requirement will be for 10% of the IHT liability so as long as you leave sufficient liquid assets to cover that there will be no need for a loan.

What are liquid assets that can be passed to beneficiaries or direct to HMRC before probate is granted?

Cash mainly. Banks have quite large limits to the amount held with them that they will pay out without obtaining probate first, for instance with Barclays as long as you don’t hold more than £50k with them they will pay it out to the executor on production of the will and proof of identity. If the amount held does require probate backs will pay direct to HMRC under the direct payment scheme.

Most of our non property will be in ISAs?(cash and stocks and shares), UTs or my SIPP. My husband does have Premium Bond which I think can go direct to HMRC.

Keep_pedalling

Boleyn19 said:

Keep_pedalling said:

Boleyn19 said:

Keep_pedalling said:

If you leave a large estate which is tied up in illiquid assets such as property you are going to have issues with paying IHT within 6 months, however the executors don’t need to take out a massive loan as HMRC allow you to pay by instalment so the immediate requirement will be for 10% of the IHT liability so as long as you leave sufficient liquid assets to cover that there will be no need for a loan.

What are liquid assets that can be passed to beneficiaries or direct to HMRC before probate is granted?

Cash mainly. Banks have quite large limits to the amount held with them that they will pay out without obtaining probate first, for instance with Barclays as long as you don’t hold more than £50k with them they will pay it out to the executor on production of the will and proof of identity. If the amount held does require probate backs will pay direct to HMRC under the direct payment scheme.

Most of our non property will be in ISAs?(cash and stocks and shares), UTs or my SIPP. My husband does have Premium Bond which I think can go direct to HMRC.

Does your husband have enough liquid assets to meet his NRB bequest to your sons? If not and it requires you to sell you second property or transfer part ownership of that property you or they are likely to be creating a CGT liability that would not be the case if you inherited everything.

Boleyn19

Keep_pedalling said:

Boleyn19 said:

Keep_pedalling said:

Boleyn19 said:

Keep_pedalling said:

If you leave a large estate which is tied up in illiquid assets such as property you are going to have issues with paying IHT within 6 months, however the executors don’t need to take out a massive loan as HMRC allow you to pay by instalment so the immediate requirement will be for 10% of the IHT liability so as long as you leave sufficient liquid assets to cover that there will be no need for a loan.

What are liquid assets that can be passed to beneficiaries or direct to HMRC before probate is granted?

Cash mainly. Banks have quite large limits to the amount held with them that they will pay out without obtaining probate first, for instance with Barclays as long as you don’t hold more than £50k with them they will pay it out to the executor on production of the will and proof of identity. If the amount held does require probate backs will pay direct to HMRC under the direct payment scheme.

Most of our non property will be in ISAs?(cash and stocks and shares), UTs or my SIPP. My husband does have Premium Bond which I think can go direct to HMRC.

Does your husband have enough liquid assets to meet his NRB bequest to your sons? If not and it requires you to sell you second property or transfer part ownership of that property you or they are likely to be creating a CGT liability that would not be the case if you inherited everything.

The wording is - those assets in his name only which at the moment are ISAs and Premium Bonds and bits in savings. 

We have our rental property, savings and a UT in joint names.

LHW99

You could perhaps gift a share of the rental property to your sons now (not cost free, or free of implications for them possibly). If you survive 7 years, it would drop out of the calculations.

Keep_pedalling

LHW99 said:

You could perhaps gift a share of the rental property to your sons now (not cost free, or free of implications for them possibly). If you survive 7 years, it would drop out of the calculations.

Not a good idea. That would leave Boleyn19 and her husband with an immediate CGT liability and if they still continue to receive all the rent the gift would be seen as one with reservation of benefit so would not fall out of their estate after 7 years. It would also add a further potential CGT liability down the line for their sons when the rental property was eventually sold. 

Boleyn19

Keep_pedalling said:

LHW99 said:

You could perhaps gift a share of the rental property to your sons now (not cost free, or free of implications for them possibly). If you survive 7 years, it would drop out of the calculations.

Not a good idea. That would leave Boleyn19 and her husband with an immediate CGT liability and if they still continue to receive all the rent the gift would be seen as one with reservation of benefit so would not fall out of their estate after 7 years. It would also add a further potential CGT liability down the line for their sons when the rental property was eventually sold. 

Thank you. I did not know any of that.
However the rental property could  be sold for care home fees. Also, as it stands now, my husband’s half of the property is left to his son from his first marriage.