Inheritance tax Allowance

Jellyknee1

Inheritance tax Allowance

I understand the inheritance tax allowance is £325k x 2 = £650k for a married person, plus £175k x 2= £350k against the property owned in joint name, making a total allowance ££650k + £350K = £1m. So no inheritance tax is paid by the receivers on £1m when both of them die. Anything above £1m, the receivers of the inheritance pay 40%.

To reduce the inheritance tax burden anything above £1m on my family receiving the inheritance when we both die, I can give them a gift (capital) provided we both live 7 years, give £3000 a year to each of the nominated family members, include their name in the property deeds and pay for a wedding.

Can you confirm that my understanding is correct and what is the best way to sort this out? 

Keep_pedalling

The annual exemption is £3000 in total not per recipient. Gifting a share in your home is rarely a good idea as it would be classed as a gift with reservation of benefit so won’t fall out of your estate. 

Albermarle

Just to be clear, the beneficiaries do not pay the 40% IHT.
The estate of the deceased person pays the IHT, before the beneficiaries are paid out.
It May end up as the same result, but it is better to keep the demarcation line clear.

Nomunnofun1

Jellyknee1 said:

Inheritance tax Allowance

I understand the inheritance tax allowance is £325k x 2 = £650k for a married person, plus £175k x 2= £350k against the property owned in joint name, making a total allowance ££650k + £350K = £1m. So no inheritance tax is paid by the receivers on £1m when both of them die. Anything above £1m, the receivers of the inheritance pay 40%.

To reduce the inheritance tax burden anything above £1m on my family receiving the inheritance when we both die, I can give them a gift (capital) provided we both live 7 years, give £3000 a year to each of the nominated family members, include their name in the property deeds and pay for a wedding.

Can you confirm that my understanding is correct and what is the best way to sort this out? 

As always with these questions there is no downside to gifting as much as you want. 

Gift, say £50000, and die within seven years and it forms part of the estate. 

Don’t make the gift and the £50000 is still in your estate. 

Jellyknee1

Keep_pedalling said:

The annual exemption is £3000 in total not per recipient. Gifting a share in your home is rarely a good idea as it would be classed as a gift with reservation of benefit so won’t fall out of your estate. 

Thanks for the clarification on the annual exemption. Does the 7-year rule apply to sharing my home with my children? 

Grumpy_chap

Jellyknee1 said:

Keep_pedalling said:

The annual exemption is £3000 in total not per recipient. Gifting a share in your home is rarely a good idea as it would be classed as a gift with reservation of benefit so won’t fall out of your estate. 

Thanks for the clarification on the annual exemption. Does the 7-year rule apply to sharing my home with my children? 

What do you mean by "sharing your home with your children"?
Do you mean your children will live in the family home with you?

If you mean to gift a proportion of your home but you remain living their and your children live elsewhere, that will mean:
 - Value remains in your estate for IHT purposes as it is GWR (gift with reservation)
 - Value may still be assessed if you need to fund care in later years as DoA (deprivation of assets)
 - Your children may incur a CGT liability on the proportion of the home you gifted
 - Your children may lose FTB status (if applicable).  Are they already home owners?
 - Your children may be deemed to have equity and impact any means tested benefits they may ever need to claim
 - Your children might try to sell your home from under you (or be forced to in the event of relationship ending).

dinosaur66

i have not looked this up so it might not be correct

is in my circumstances but not sure with yours

someone will correct my advice if it is wrong

if your children live in your property and you have to go into private care as long as the children are properly registered as living at your house ie council tax then your property will not be taken into consideration for care home fees

they have to be over the age of 60 for this to be the case

where i am not sure is my property is jointly son & mother are 50 /50 joint owners not sure if it was 0/100 in my mothers name only would this rule still apply