Inheritance tax question re passing on property when parents are separated and not divorced

joseph80

I know you can leave your property to your direct descendent which increases the threshold to £500,000 before inheritance tax is due or if it is left to your spouse and your spouse leaves it to a child, then potentially the threshold is £1,000,000.

My parents have been separated for about 30 years (extremely amicably) and have never divorced. Both very elderly now and no new partners. 

Rough figures:
Mum's property - worth £600,000
Dad's property - worth about £250,000

Would it be financially more beneficial for Mum to leave her property to Dad (and Dad leave his property to Mum) and then pass down to direct descendent? 

I believe that although they are separated (but not divorced), they are considered to be the same as a married couple of these purposes. 

I have tried looking this up and seeking advice, but it is tricky to explain although I imagine not a completely unique scenario.

Keep_pedalling

If she had a will that stipulated in the event she died first that her children inherit the equivalent of her NRB + RNRB with the remainder inherited by her husband would avoid an IHT liability if she died first as both exemptions can be claimed. 

Do both of them currently have wills in place?

joseph80

Keep_pedalling said:

If she had a will that stipulated in the event she died first that her children inherit the equivalent of her NRB + RNRB with the remainder inherited by her husband would avoid an IHT liability if she died first as both exemptions can be claimed. 

Do both of them currently have wills in place?

Thank you for your reply. Yes they do both have wills in place. Currently both wills state that everything is being left to their 2 children. But they are open to changing this if it would be beneficial to do so.

Keep_pedalling

Your mother should change hers otherwise there will be at least £40k IHT to pay if she dies first. What other assets do each of them own? Does the total exceed £1M?

joseph80

Keep_pedalling said:

Your mother should change hers otherwise there will be at least £40k IHT to pay if she dies first. What other assets do each of them own? Does the total exceed £1M?

No - some money in savings accounts, but nothing that would take the combined total of property and cash over £1m.

Would you advise speaking to a solicitor about how to reword the will? Is it just Mum who needs to reword it or Dad too? Obviously we don't know which way round they may outlive each other...

Keep_pedalling

Yes she should see a solicitor about making a new will. I think an immediate post death interest trust clause may be appropriate here so it would be wise to see a STEP qualified solicitor to do this.

https://www.step.org/about-step/public