Wills and Inheritance tax question

Hypothetical26

Looking for help please

Friends are civil partners in their 50s. They own their house, valued £550k, as Tenants in Common, with a £100k mortgage outstanding. Partner X has a son 25 & daughter 21. Partner Y has a daughter 23. X’s estate value is around £850k (after 1/2 mortgage) Y’s estate value around £720k.

What is the best way to write their Wills to reduce Inheritance tax please?

sheramber

https://forums.moneysavingexpert.com/discussion/6652398/wills-and-inheritance-tax-question

They need to take professional advice.

Keep_pedalling

They definitely need wills but to protect their children’s inheritance in the case that the serviving spouse remarries or changes their own will, rather than reducing IHT. This may include the use of immediate post death interest trusts, so they both need to see a STEP solicitor who is qualified to advise trusts.

To reduce their IHT liabilities the could consider gifting to their children and covering IHT from an unfortunate early death with term life insurance.

poseidon1

https://forums.moneysavingexpert.com/discussion/6652398/wills-and-inheritance-tax-question

They will be looking to establish IPDI trusts in each of their wills to benefit their respective children whilst securing continued rights of occupation for the surviving partner.

Requires a competent solicitor to draft and explain the rights and obligation arising from such arrangements, but arguably this form of trust is tailored made for these blended family situations in that they preserve transferable nil rate bands, as well as ear mark ultimate benefits for children.

in the meantime might make sense for the couple to implement a life policy to pay off mortgage on premature death ( joint life 1st death).

Hypothetical26

Thank you everybody. I will pass this information on.

Andy_L

A lot depends on what makes up the rest of their estate. Is it liquid assets, pension savings, another house?

Albermarle

As mentioned getting the correct wills in place, is more of a priority than worrying about inheritance tax, that might not be payable for 40 years, when no doubt the rules will be different anyway.