Inheritance Tax: Save £100,000s with simple advanced planning Article Discussion
Comments
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Tressilliana wrote: »Hi all
Can anyone advise. I've seen a similar thread from Angelica, a couple of years back, but couldn't find the answer.
My parents live permanently in Austria (Dad is British citizen and Mum is an Austrian citizen), and they own a house in both Austria (value c.£500k) and UK (value c.£350k), and their savings are in UK banks (approx. £50k).
As they live in Austria, things are slightly different and I don't understand about double taxation rules etc......When one of them dies, will the other have to pay any inheritance tax, and when both die, will my brother and I have to pay inheritance tax in both UK and Austria. Is there anyway of getting around it? They have mentioned that they want to leave the houses, especially the one in Austria, to my brother and I.
Any advise would be greatly appreciated.
Thanks
:beer:
I would not begin to advise you on an Austrian/British estate.
However you might want to bone up on the terminology before seeing a suitable qualifies adviser:
http://www.hmrc.gov.uk/cto/customerguide/page20.htm
This site seems to be up to date -and if you are using a commercial browser is incredibly annoying (you have not won an ipod!)
http://www.globalpropertyguide.com/Europe/United-Kingdom/Inheritance
The same information about not getting much of a spouse exemption for a foreign spouse, must be hidden somewhere on the HMRC web site.
Found it:
Spouse or civil partner exemption
Gifts made between spouses or civil partners are exempt from inheritance tax. This exemption is limited to £55,000 if the deceased (or donor) was domiciled in the UK and their spouse or civil partner was not domiciled in the UK at the time of the transfer.
http://www.hmrc.gov.uk/cto/glossary.htm#employeetrust0 -
What about “Dispositions for maintenance of family”, as provided in the Inheritance Tax Act, 1984 (c. 51), as a means to reduce IHT liability?
Section 11, subsection (3) states, “ A disposition is not a transfer of value if it is made in favour of a dependent relative of the person making the disposition and is a reasonable provision for his care or maintenance”.
Section 11, subsection (6) defines “dependent relative” as “...a relative ... who is incapacitated by old age or infirmity from maintaining himself ...”
The point being, if a disposition from capital (in the above circumstances) is not a 'transfer of value' then there is no eventual tax liability on the donor's estate, even if the donor dies within seven years. So it is ignored in the eventual calculation of an estate's liability.
Has anyone any experience of this allowance?
And what constitutes “reasonable provision” given that the average income for a single person is about £24,000 a year? Apparently the HMRC ignores state benefits (or entitlement to benefits) that the recipient has received (or could have received) whilst receiving the “reasonable provision”.0 -
When making a gift that exceeds the tax free limit should that gift be registered with HMRC and if so, how is it done.0
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Some years ago, FIL opened a joint a/c with DH and deposted £5,000 (I think). This was done so that in the event of anything happening to FIL, which rendered him unable to pay bills, DH would have access to monies. I suggested this as an 'insurance policy'. The money is still there and has never been touched. We also have the old-style EPA for him, should the need arise.
I have just read on another forum that in the event of FIL's death, this account passes 100% to DH.
http://forums.moneysavingexpert.com/showthread.php?t=3783453 Post 15
If this is the case, and I don't know if this is correct, does this money then fall out of FIL's estate and is not subject to IHT?0 -
As I understand it it by passes the estate and any provisions in the will/intestacy rules as to who should receive it but still comes into IHT calculations0
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And, while both people are alive, the money in the account is taken to be owned 50/50 so you have it declare it as your savings, eg if you claim any means-tested benefits.0
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My father passed away in Jan 2012. His will was written prior to the changes in IHT in 2007. He therefore put a Trust in the Will for myself and 3 siblings to avoid IHT, my mother running off with someone else & squandering the money and also to avoid care home fees.
We have approached a solicitor to do the probate but she has said that we will need to do a DOV because of the following clause in the will which states "If my wife ... is living on the twenty-eighth day after my death AND providing Inheritance Tax has not been abolished AND the inheritance saving would be more than five thousand pounds THEN, I GIVE to my Trustees on the trust set out in 5 the amount which at my death equals the maximum which can be given to them on these trusts without Inheritance Tax becoming payable in respect of this gift ("the Nil Rate Sum")"
The solicitor has suggested that because my mother still wants to protect the money, mainly against care home fees and because she really wants to carry out my late father's wishes that we do a DOV, still have some kind of trust but one which is much easier to manage and that my mother has a Life Interest in.
My main concern is my mother being ripped off by the solicitor and paying for things which are not necessary.
They owned the home they lived in as Tennants in common with no mortgage (worth approx £320k) No other assets owned solely by my father. Just joint bank accounts with approx £50k from a sale of a 2nd property last year.
Any advice would be much appreciated.0 -
The solicitor is suggesting that mum becomes the beneficiary of an interest in possession trust.
She gets her share for her lifetime, then it goes to predefined "remaindermen".
My mum was accidentally left in this situation because my dad died intestate.
[Mum was not all that happy about the situation, I think she thought she should get the lot and then take it with her when she went.]
As far as I know no local authority has managed to challenge the ownership of property by an interest in possession trust, but when it comes to IHT it counts as leaving the property to the spouse.
You dad's will is a text book example of a will that should have been changed in autumn 2007, when Gordon Brown panicked under threat from
Cameron to increase the IHT nil rate band to £1,000,000 [We are still waiting Dave !] .
The solicitor is offering to belatedly re-write it using a Deed of Variation; expect that to cost £500 plus.
Are there any minors affected by what is proposed by changing the will? They might have a problem authorising the removal of their benefits.0 -
Thanks for your reply.
There are no minors involved. Myself and my siblings are all in our 30's.
So can I confirm then that the Interest in Possession Trust would mean that when my mother passes, that we would then qualify for twice the NRB?
Also if my mother is a beneficiary of the trust, whose name would be on it? We were under the impression it would just have the 4 children's names on it. And would this mean the property would be liable for CGT if my mother was to downsize in the future?
The solicitor has said it would be easier to manage, do you know what would be involved ie tax returns, annual meetings etc?
We have been told that probate is expected to be a maximum of £2000 plus vat which includes the DOV. Does this sound like a reasonable amount?
Sorry, one last question, I promise! My mum has been told that she will need to wait 6mths after probate has been granted to do the DOV Incase her mental health should detoriate. Is this normal?
I don't mean to fire so many questions at you, I'm just so relieved to have found someone who is willing to try and help.
Thank once again.0
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