Inheritance Tax

Options
IronDuke
IronDuke Posts: 14 Forumite
in Cutting tax
Hi,

I would be grateful if anyone can clarify the IHT situation for me.

My mum sadly died last week and although I had previously sold her home to pay for Care Home costs her sudden death means I have inherited nearly all the value of her home - £240k

For myself and my wife this means our total assets - our home and savings combined now stand at £735k.

As I understand it I have a IHT allowance of £325k plus £100k as I am leaving my wife everything including her half of the house and she everything to me if she dies first meaning £425k each?

I want to pay off my daughter's mortgage which is £50k can I do so without causing any tax problems for her when we die and do "gifts" only actually apply if you already have savings and property worth more than the allowance?

As you can see I'm confused by all this!:)
«1

Comments

  • Tom99
    Tom99 Posts: 5,371 Forumite
    First Post First Anniversary
    edited 3 February 2018 at 12:06PM
    Options
    [FONT=Verdana, sans-serif]You can do a deed of variation in relation to your inheritance, giving your daughter £50k. That way it will not touch your estate at all.
    [/FONT]
  • antrobus
    antrobus Posts: 17,386 Forumite
    Options
    IronDuke wrote: »
    ...As I understand it I have a IHT allowance of £325k plus £100k as I am leaving my wife everything including her half of the house and she everything to me if she dies first meaning £425k each?...

    You have £325k each. If you die first and leave everything to your wife she will have £650k plus whatever the housing nil band is at that time.

    Potentially up to £1m I think.
    IronDuke wrote: »
    ..
    I want to pay off my daughter's mortgage which is £50k can I do so without causing any tax problems for her when we die and do "gifts" only actually apply if you already have savings and property worth more than the allowance?

    That £50k would be a potentially exempt transfer. Where you to die within 7 years, it could be added back into your estate for IHT purposes. That won't cause your daughter any tax problems.
  • Mojisola
    Mojisola Posts: 35,557 Forumite
    Name Dropper First Post First Anniversary
    Options
    IronDuke wrote: »
    I would be grateful if anyone can clarify the IHT situation for me.

    My mum sadly died last week and although I had previously sold her home to pay for Care Home costs her sudden death means I have inherited nearly all the value of her home - £240k

    For myself and my wife this means our total assets - our home and savings combined now stand at £735k.

    I want to pay off my daughter's mortgage which is £50k

    You could do a deed of variation of your Mum's estate so your daughter inherits a lump sum directly from her grandmother.
  • IronDuke
    IronDuke Posts: 14 Forumite
    Options
    Mojisola wrote: »
    You could do a deed of variation of your Mum's estate so your daughter inherits a lump sum directly from her grandmother.

    Hi.

    My mum's estate was essentially just cash as I had had to sell her home some weeks before she died to pay Care Home fees and because she had dementia and to ensure the money was protected by the FSCS it was put into three separate accounts in my name.

    Does this mean I now couldn't do as you suggest?

    I'm still baffled as to whether I'm liable for IHT at all.
  • Mojisola
    Mojisola Posts: 35,557 Forumite
    Name Dropper First Post First Anniversary
    Options
    IronDuke wrote: »
    My mum's estate was essentially just cash as I had had to sell her home some weeks before she died to pay Care Home fees and because she had dementia and to ensure the money was protected by the FSCS it was put into three separate accounts in my name.

    Does this mean I now couldn't do as you suggest?

    No.

    https://www.gov.uk/alter-a-will-after-a-death
  • IronDuke
    IronDuke Posts: 14 Forumite
    Options
    Mojisola wrote: »
    No.

    Thanks for that assume I complete IOV2 form?
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
    First Anniversary Name Dropper First Post Combo Breaker
    edited 3 February 2018 at 5:11PM
    Options
    IronDuke wrote: »
    I complete IOV2 form?

    The form is a guide to ensure that the IOV you write is legally sufficient to give you the outcome you want. You can write it out as a letter in pen on paper if you want, or take a pro forma off the internet. Just use IOV2 to ensure you've not omitted anything vital or included anything unnecessary.

    By the way, you'll sometimes see "Changes can be made provided all the beneficiaries agree". I understand that this is untrue. It should say "Changes can be made provided all the beneficiaries affected by the IOV agree".

    If I were IOVing a quarter of a million pounds I suspect I'd flash out £250 or whatever for a solicitor. For £50k and a very simple case; well, are you feeling confident?

    Is this any help?
    http://www.daviessolicitors.co.uk/forms_davies/Estate%20Planning%20&%20Trusts/Deed%20of%20Variation%20(Basic).pdf

    Or this?
    https://www.moneymarketing.co.uk/tony-wickenden-constructing-a-valid-deed-of-variation/

    Or lastly this?
    https://www.accountingweb.co.uk/any-answers/can-i-draw-up-a-simple-deed-of-variation-myself
    Free the dunston one next time too.
  • IronDuke
    IronDuke Posts: 14 Forumite
    Options
    antrobus wrote: »
    You have £325k each. If you die first and leave everything to your wife she will have £650k plus whatever the housing nil band is at that time.

    Potentially up to £1m I think.

    That £50k would be a potentially exempt transfer. Where you to die within 7 years, it could be added back into your estate for IHT purposes. That won't cause your daughter any tax problems.

    When you say housing nil band is that the £100k that we each get currently and which rises again next April?

    So when I die everything goes to the wife and there is no IHT payable? No matter what the value of the estate?

    And when she dies she will have already transferred my unused £325k plus the £100k (or more) nil band meaning a total figure of £855k? Way more than her estate will be worth? Is that assumption right or wrong?

    If I have got it wrong please put me right.
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
    First Anniversary Name Dropper First Post Combo Breaker
    Options
    IronDuke wrote: »
    When you say housing nil band is that the £100k that we each get currently and which rises again next April?

    So when I die everything goes to the wife and there is no IHT payable? No matter what the value of the estate?

    And when she dies she will have already transferred my unused £325k plus the £100k (or more) nil band meaning a total figure of £855k? Way more than her estate will be worth? Is that assumption right or wrong?

    If I have got it wrong please put me right.


    Yes. Yes. Yes. But
    2 x 325 + 2x 100 =850, which I imagine is what you meant. Darn that typo!
    Free the dunston one next time too.
  • IronDuke
    IronDuke Posts: 14 Forumite
    Options
    kidmugsy wrote: »
    Yes. Yes. Yes. But
    2 x 325 + 2x 100 =850, which I imagine is what you meant. Darn that typo!

    Not a typo clearly "complex" maths is not my strong point!!!! :rotfl:

    So in which case I can just give my daughter £50k to pay off her mortgage without the need to worry about any IHT liability when me and the missus have gone as the
    estate will be less than that £850k?
This discussion has been closed.
★ ★ ★ Meet your Ambassadors

Categories

  • All Categories
  • 343.2K Banking & Borrowing
  • 250.1K Reduce Debt & Boost Income
  • 449.7K Spending & Discounts
  • 235.3K Work, Benefits & Business
  • 608.1K Mortgages, Homes & Bills
  • 173.1K Life & Family
  • 247.9K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.9K Discuss & Feedback
  • 15.1K Coronavirus Support Boards