Inheritance Tax

thomas100_2

My wife and I have a property in joint name worth about £800k and she has savings in bonds , ISAs etc plus cash worth about £500k.

In the Will I will be inheriting whole of her assets if she dies before me. We have a Mirror Will.

Will I be liable to Inheritance tax as her assets will be worth £900k.

Kind regards

Ash

se2020

No.

There is no tax on assets passed to a married partner regardless of value.

Keep_pedalling

IHT will only kick in on the second death, so who inherits then?

thomas100_2

Our son- obviously that is when the Estate will attract Inheritance Tax

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82010907#Comment_82010907

If your son is getting the house, then the person who dies second will have total nil rate bands of One Million Pounds.

So £900K would not attract any IHT under present rules. In 2027 the value of any unused DC pension pots will also be included in the calculation, so that might make a difference.

Also the levels are frozen for an indeterminate time, so inflation may also push it over.

You may want to consider making gifts to family and charity and/or spending more, to reduce any IHT liability.

Keep_pedalling

https://forums.moneysavingexpert.com/discussion/comment/82011011#Comment_82011011

£900k is just the value of the OPs wife assets if the OP inherits he will be sitting on £1.3M plus anything he holds in his own savings, so well into IHT territory.

poseidon1

Clearly the son will face IHT on 2nd death of parents, which may worsen if there any DC pensions of significant size the OP did not include in the estimate of assets.

Depending on respective ages of the spouses, serious thought should be given to joint life 2nd death insurance to provide the son with a capital sum to help pay IHT in due course and preserve the net estate parents might wish to leave him.

There are also other insurance based capital investment IHT mitigation products they may wish to explore with an IFA given the liquid resources available.

kermchem

Assuming that you and wife have pension income to live on, then £500K in ISAs might be more than you need to live / fund care. Make gifts now to son and live for more than 7 years is one way to reduce IHT.

In 1990 I was in a similar position to your son. My recently retired parents had assets that exceeded the IHT thresholds of the time, and I was a poor student with no means of paying the IHT before settling the 2nd estate. With a friend who was a financial adviser they took out a 2nd death life insurance policy in trust with me as beneficiary "to pay the IHT", the lone trustee was the husband of dad's niece. To begin with there were issues with the incompetent life company being unable to index the sum assured each year without cancelling the policy and the direct debit. As surviving parent got older the premiums went up considerably at each review - we could have reduced the sum assured. In the end parents paid in about as much as was paid out (that is how insurance works!). When 2nd parent died the estate was below the IHT threshold by a few £K - increase in thresholds, NRB, transferable nil rate, and gifts from income of 2nd parent, etc.. Sibling and I would up the estate, sold house, ISAs, insurance bonds, bank accounts, ancient saving products sold as life policies, and the LAST by a long way thing to be settled was the 2nd death life policy. Trustee had forgotten anything about it, life company ownership had changed hands several times, the adviser who sold them it had lone gone, and insurance company were just s-l-o-w, perhaps inevitable with a 25 year old policy. Oh, and the trustee was himself dead three years later. I do hope my parents were nice to him when they asked him to do this.

With the benefit of 20-20 hindsight my parents should have given me a gift and made me put it into an account "to pay the IHT".

My recommendation to anyone exploring such a policy is to pick your trustees with care, more than one and ideally include the beneficiary if allowed. But, first, work out if there are other ways to avoid the need to find money up front to pay the IHT - much easier now than in 1990, banks will apparently pay HMRC as well as funeral director before probate granted.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82011020#Comment_82011020

Sorry, should have read the OP properly !