This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Best use of tax allowance

zephrindruin
Posts:3
Joined:Fri Dec 15, 2017 11:56 pm
Best use of tax allowance

Postby zephrindruin » Sat Dec 16, 2017 12:12 am

My late father's estate exceeds the £325,000 threshold in ISAs, bonds and shares. He also was tenant in common with my mother in a house estimated worth of £750,000.
His will states gifts of money of £280,000 to his children and grandchildren and the remainder of his estate to my mother.
My question is will this way of inheritance mean that no Inheritance Tax is due. Also can my dad's half of the house of the tenants in common be transferred to my mother.
Many thanks

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Best use of tax allowance

Postby maths » Sun Dec 17, 2017 3:51 pm

Father's estate worth 280k plus 375k ie 655k.

Assuming no lifetime gifts within 7 years of death then his nil rate band of 325k covers the 280k and hence no IHT thereon (or technically taxed at 0%). Residue to surviving wife is exempt.

Hence no IHT.

As father has left his 50%(?) interest in the property as part of his residue then it passes to wife under his will. So yes mother then owns property 100%.

Father not entitled to the newly introduced Residence nil rate band (RNRB) as property left to wife. On wife's death if she leaves property to her child(ren) then she will be entitled to her own RNRB plus that of husband (in total at least 200k) plus her own nil rate band (325k) plus a transfer from husband of a % of his nil rate band; that % 13.84%.

In short, on wife's death no IHT unless her estate exceeds (on current figures) [200k + 325k + 44,980] ie 569,980. As house worth 700k an IHT charge seems certain.

Maybe a deed of variation might be considered.

zephrindruin
Posts:3
Joined:Fri Dec 15, 2017 11:56 pm

Re: Best use of tax allowance

Postby zephrindruin » Sun Dec 17, 2017 8:47 pm

Thank you so much for your reply. It really clarity's things for us.
One more question. You mention a possible deed of variation. Would this be on my father's or mother's will? My brother and I, as executors of dad's will, are quite open to the suggestion of a deed of variation if it helps the situation.
Thanks again


Return to “Inheritance Tax, IHT, Trusts & Estates, Capital Taxes”