IHT planning

TBC15
TBC15 Posts: 1,452 Forumite
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in Cutting tax
In the event of my death, could my wife “marry” my single younger brother for IHT purposes?
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  • Keep_pedalling
    Keep_pedalling Posts: 16,591 Forumite
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    In what way do you think this could reduce an IHT liability?
  • getmore4less
    getmore4less Posts: 46,882 Forumite
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    Spouse exemption when the new spouse dies.

    It is an unused loophole in IHT,

    chain marriage/civil partners and using up nil rate bands rather than transferring to offload from the chain. .
  • Keep_pedalling
    Keep_pedalling Posts: 16,591 Forumite
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    TBC15 wrote: »
    In the event of my death, could my wife “marry” my single younger brother for IHT purposes?
    getmore4less wrote: »
    Spouse exemption when the new spouse dies.

    It is an unused loophole in IHT,

    chain marriage/civil partners and using up nil rate bands rather than transferring to offload from the chain. .

    But that would require the new spouse to die first. Is Mrs OP a black widow?
  • getmore4less
    getmore4less Posts: 46,882 Forumite
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    You chain DOWN the ages and never pay any IHT.

    As the plan is to remarry you don't need the transferable nil rate band so can offload that at each death, if kids thats 1/2million soon.
  • TBC15
    TBC15 Posts: 1,452 Forumite
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    Current possible scenario.

    I die, wife inherits the lot tax free.
    Wife dies younger brother gets hammered for CGT.

    Proposed scenario

    I die, wife inherits the lot tax free.
    Wife marries my younger brother.
    Wife dies younger brother inherits tax free.
  • HappyHarry
    HappyHarry Posts: 1,576 Forumite
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    TBC15 wrote: »
    Current possible scenario.

    I die, wife inherits the lot tax free.
    Wife dies younger brother gets hammered for CGT.

    Proposed scenario

    I die, wife inherits the lot tax free.
    Wife marries my younger brother.e
    Wife dies younger brother inherits tax free.

    Assuming you mean IHT rather than CGT, then yes, this works, providing everyone dies in the right order.

    It becomes far more problematic if wife wants to leave her younger brother anything 😀
    I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.
  • Keep_pedalling
    Keep_pedalling Posts: 16,591 Forumite
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    So all you need is an endless supply of childless single people willing to engage in a marriage of convenience.

    They also need to be willing to die in the right order, and be honest enough not to run off with the money.

    I wonder why lots of people are not doing it ��
  • Sibbers123
    Sibbers123 Posts: 324 Forumite
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    It effectively works, but the reason why most people don't do this is that;
    • You need someone for your widow to marry (i.e. a single relative) - this must be legal - you can't marry your own family for obvious reasons
    • You need a lot of trust in your widow to fulfil your wishes. They can leave the estate to who they wish.

    Also, doing it this way, you are effectively wasting one of your £325k nil rate bands. The maximum nil rate band anyone can have is 200% of the current nil rate band, so on death of younger brother, he will have a nil rate band of £650,000 (his and your wife's) - yours is effectively wasted so you may as well give £325k directly to your brother...
  • TBC15
    TBC15 Posts: 1,452 Forumite
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    edited 13 October 2018 at 6:31PM
    Sibbers123 wrote: »
    It effectively works, but the reason why most people don't do this is that;
    • You need someone for your widow to marry (i.e. a single relative) - this must be legal - you can't marry your own family for obvious reasons
    • You need a lot of trust in your widow to fulfil your wishes. They can leave the estate to who they wish.

    Also, doing it this way, you are effectively wasting one of your £325k nil rate bands. The maximum nil rate band anyone can have is 200% of the current nil rate band, so on death of younger brother, he will have a nil rate band of £650,000 (his and your wife's) - yours is effectively wasted so you may as well give £325k directly to your brother...

    If the estate is worth more than 2 million I can still see advantages from an IHT point of view, paperwork if nothing else.

    Quick update shouldn’t it be 650,000 plus 125000 out of the house?
  • Keep_pedalling
    Keep_pedalling Posts: 16,591 Forumite
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    TBC15 wrote: »
    If the estate is worth more than 2 million I can still see advantages from an IHT point of view, paperwork if nothing else.

    Quick update shouldn’t it be 650,000 plus 125000 out of the house?

    No the residential nil rate band only applies if leaving your estate to your children or their offspring.

    If you have £2M to leave then there are other things you should be doing to reduce IHT, but as it sounds like you have no children why are you even bothered about it?
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