IHT question about owning 2 properties and estate valued over 1 million

UnsureAboutthis

With pensions about to be inc in IHT, many more people who have worked all of their lives will fall into this trap and millions more over the next decade or so

I'm aware re the one million exemption ATM

If the estate was worth more than a million as things stand and someone wanted to pass on percetanges to their children and a grandchild, what would happen if you owned a main home and a BTL and in the will you had declared that you wanted to give percentages and for argument sake, lets call it 5 x 20%.  Would the person still be entitled to the 1 million threshold?

I hope I'm clear but happy to clarify further.

I'm not interested in the tax-free gifts etc, just to let you know, save you time, etc.

HappyHarry

The estate might be entitled to the £1m threshold if there are two full Nil Rate Bands and RNRBs available, and the main residence was valued at at least £350,000 and the total estate was less than £2m.

To be frank - I am not exactly sure what your question is.

Keep_pedalling

In your example all the beneficiaries are direct descendants so yes the RNRB would still be available, but you also need to be windowed to get the £1 and your home needs to be worth at least £350k  

probate_slave

Since you were previously asking about a hypothetical £3m estate, be aware that the residential nil rate band is currently tapered down for an estate over £2m. An estate over £2.35m won't benefit from either RNRB, and the IHT allowance will only be £650k on the second death.

UnsureAboutthis

Keep_pedalling said:

In your example all the beneficiaries are direct descendants so yes the RNRB would still be available, but you also need to be windowed to get the £1 and your home needs to be worth at least £350k  

Yes, I'm aware of that, thanks.

So, when percentages are given out and the person, the remaining half of the married couple, where he/she passes, can as it stands own more than one property (at least one used as main home) and give out percentages of any amount and still quaify for the million IHT threshold as it stands. This assumes that none of the IHT was used in the previous 7 years preceding the first passing.

HappyHarry

UnsureAboutthis said:

Keep_pedalling said:

In your example all the beneficiaries are direct descendants so yes the RNRB would still be available, but you also need to be windowed to get the £1 and your home needs to be worth at least £350k  

Yes, I'm aware of that, thanks.

So, when percentages are given out and the person, the remaining half of the married couple, where he/she passes, can as it stands own more than one property (at least one used as main home) and give out percentages of any amount and still quaify for the million IHT threshold as it stands. This assumes that none of the IHT was used in the previous 7 years preceding the first passing.

Yes. The £1m threshold depends on the estate - not what percentages are given to any beneficiaries. 

Of course - if not all the beneficiaries were direct descendants than it would be a different answer.

Albermarle

probate_slave said:

Since you were previously asking about a hypothetical £3m estate, be aware that the residential nil rate band is currently tapered down for an estate over £2m. An estate over £2.35m won't benefit from either RNRB, and the IHT allowance will only be £650k on the second death.

That is not correct, according to a search on google.
The tapering is £1 reduction in RNRB for every £2 over £2Million.
So on second death the estate would have to be over £2.7 Million to lose out all the RNRB.

Also the estate value used is the net value, which can be different to the the one used for IHT calculation. 
One obvious difference is that deathbed gifts reduce the net value, but not for IHT purposes. It can get complicated though.
Residence nil rate band

probate_slave

Albermarle said:

That is not correct, according to a search on google.
The tapering is £1 reduction in RNRB for every £2 over £2Million.
So on second death the estate would have to be over £2.7 Million to lose out all the RNRB.

I was envisaging the OP dying first and leaving his above-£2.35m estate to his wife. There would be no unused RNRB to bring forward on her own death and, assuming assets are conserved, no RNRB available for her estate either.
Agreed the position is different if the order of deaths is reversed.