IHT on a remarriage

5arah123

My mum has passed away, my dad has remarried.  My Dad's Estate is worth say £600k.  15% of which goes to new Wife on his death. 85% to his children.

Is it correct that my dad still has his first wife's (my mum) IHT unused allowances and as my dad is leaving his property to his children, he will have the £1m exemption?

What worries me is how does this affect new wife?  Her Estate is worth say £800k, plus £90k from my Dad's Estate.  The new wife is also a widow, twice over.  What will her IHT NRB be?  

Incidentally, the new wife can remain in my dad's house until she chooses to leave, and as she is 12 years younger, this can be sometime.   Dad has done a DIY will and this worries me.

Any help would be very much appreciated.

RAS

Just trying to work out exactly what this means gives me a head ache as there are different scenarios.

It appears as part of this there would be an Immediate Post Death Interest trust, allowing his widow to remain in the house. The details of the trust depend on precisely what is written in the will. And on the way in which the house (and other assets) are held.

In a complex family situation like this dad really does need a STEP solicitor rather than DIY or a will writer.

Keep_pedalling

You are quite correct to worry about a DIY will which could result in a financial disaster for his beneficiaries. What he wants to happen can be achieved through his will creating an immediate post death interest trust (IPDIT), so he needs to make an appointment with a solicitor (preferably a STEP qualified one as there may be a trust involved) to get a suitable will drawn up. With this size of estate it is madness to try and save a few hundred quid on a DIY will.

Having said that if his current wife has significant assets of her own a IPDIT could have a negative impact on IHT, because anything going into such a trust for a spouse will not use any of his NRB as it is subject to spousal exemption and for IHT purposes it then forms part of the surviving spouse’s estate so you have to be careful here and professional advice is an absolute must for them both. She may be 10 years younger but that is no guarantee he goes first.

poseidon1

Keep_pedalling said:

You are quite correct to worry about a DIY will which could result in a financial disaster for his beneficiaries. What he wants to happen can be achieved through his will creating an immediate post death interest trust (IPDIT), so he needs to make an appointment with a solicitor (preferably a STEP qualified one as there may be a trust involved) to get a suitable will drawn up. With this size of estate it is madness to try and save a few hundred quid on a DIY will.

Having said that if his current wife has significant assets of her own a IPDIT could have a negative impact on IHT, because anything going into such a trust for a spouse will not use any of his NRB as it is subject to spousal exemption and for IHT purposes it then forms part of the surviving spouse’s estate so you have to be careful here and professional advice is an absolute must for them both. She may be 10 years younger but that is no guarantee he goes first.

Absolutely agree and sounds like the DIY will is already a disaster waiting to happen in purporting to give new wife just 15% of his estate whilst simultaneously giving her the right to occupy the family home  ( presumably for life) which maybe the bulk of the father's estate at death. So already a contradiction here.

Given the numbers involved for this blended family, suggest father instruct a STEP qualified solicitor ASAP to construct appropriate wills for both parties, having regard to the interplay of the various NRBs as they relate to each spouse's testamentary wishes, and how these NRBs play out assuming the twice widowed spouse survives the father. Certainly do not want to jeopardise availability of Residence nil rate bands for the home , by virtue of poor wills drafting.

5arah123

Thank you both.  Really appreciate it, and will speak to my Dad further.