IHT Nil Rate Band

StokeHarry

Wife died 2024 Tenants in Common

I created a deed of variation gifting £320,000 plus her half of house, worth £215,000, from my wife's estate which was £400,000 plus her half of the house to our daughter.

Probate granted.

My estate cash/investments are £510,000 plus my half of house £215,000

My will gifts everything to my daughter including my half of the house.

Does my estate get the extra £175,000 nil rate band allowance?

Meaning she would get my half of the house and only have to pay IHT on  the £10,000 excess over the £325,000+£175,000 IHT allowance?

Keep_pedalling

Why did you do that? it is rarely a good idea to do a DoV for things covered by spousal exemption.

For starters the DoV has created an IHT liability because you will have used up all of her NRB and RNRB  (£500k in total). In total your daughter will have received £535k so a £14k IHT liability has been created and you now need to do a full IHT return. If you have not actually transferred the ownership yet it is not too late to undo this error.

The DoV means none of the NRBs are transferable to your estate, had you simply gifted the cash yourself the transferable NRB would still have been available and if you manage to live a further 7 years will fall out of your estate. A better solution with the share of the house would either to keep it in your name or set up an immediate post death interest trust. Both would avoid the IHT liability and the need to complete an IHT return.

One other issue with your daughter being given a share of your home is that it creates a potential CGT liability for her when the house is eventually sold. Another (if she is not already a home owner) is additional 5% of SDLT when she does buy one.

StokeHarry

Thanks

Obviously poor advice I was given.

HMRC has said no IHT payable

Probate has been granted  so presumably no IHT to pay.

Keep_pedalling

There would be no IHT to pay without the deed of variation or if you had not exceeded the combined NRBs. What is the current status of the property transfer? If you have not made any changes to the land registry it is not too late to undo this.

StokeHarry

Applied to Land registry around June so presumably gone through by now. I wanted to reduce my estate as at 79 I haven't got long to go statisically to make the 7 years.

Do you know if gifts to a disabled persons trust are IHT free?

thanks

Keep_pedalling

StokeHarry said:

Applied to Land registry around June so presumably gone through by now. I wanted to reduce my estate as at 79 I haven't got long to go statisically to make the 7 years.

Do you know if gifts to a disabled persons trust are IHT free?

thanks

Unfortunately although you have reduced your estate you have not reduced the IHT liability and have taken your wife’s estate from an exempt one to one that has a IHT liability which should have been paid already. If you don’t deal with this now it is going to cause a major headache for whoever deals with your estate. 

Leaving money to a disabled person’s trust does not reduce IHT although the trust is treated favourably for other taxes.

Does your daughter live with you? If she does then you could simply tear up the DoV document and make both gifts from you rather than your wife’s estate. If she does not live with you then there would be the issue of CGT on the eventual sale of the property, and the 7 year rule would not kick in as this would be a gift with reservation, but it may still be the better option.

StokeHarry

Thanks

Submitted all the forms to HMRC that they sent me and now say no IHT payable and I have settled probate.

Daughter lives with me.

It seems I was given poor advice so I guess the best thing to do now is give money to my daugthter's trust fund and hope I live 7 years. 

How much should I give, is it anything over 325+175?

Thanks again

Keep_pedalling

StokeHarry said:

Thanks

Submitted all the forms to HMRC that they sent me and now say no IHT payable and I have settled probate.

Daughter lives with me.

It seems I was given poor advice so I guess the best thing to do now is give money to my daugthter's trust fund and hope I live 7 years. 

How much should I give, is it anything over 325+175?

Thanks again

I think they say nothing to pay because they are unaware if the DOV. I would suggest you simply the deed of variation and forget the DoV and record both gifts as having come from you. This has the advantage that there is a possibility that none of this will be included in any IHT calculation should you survive 7 years and £215k will be subject to taper relief so will reduce IHT a bit providing you survive for more than 3 years. 

Doing this means that none of your wife’s transferable NRBs have been used and your estate will have £1M of exemptions. 

If you have already gifted your daughter the £325k cash I think it probable a bit late to get it in trust, but you should take professional advice on this from a STEP solicitor, and you should certainly review you current will with them as well.

StokeHarry

Thanks for your help. HMRC has seen the DOV, sent off with all the forms,  and I have gifted the 320K from my wife' assets to the trust. Waiting for new advice on my will from Legal services.

StokeHarry

Contacted Land registry. Still a bit confused  so all HMRC forms completed, DOV included, they say nothing to pay.  So when I go, what would be the IHT? House 235K & Savings 500K to daughter living in the house?  Thanks so much  for helping me. SH

StokeHarry

Thanks for the help, all sorted, seasons greetings