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Where Taxpayers and Advisers Meet

Where to begin

Crest44
Posts:1
Joined:Sat May 14, 2022 6:54 am
Where to begin

Postby Crest44 » Sat May 14, 2022 7:03 am

Hi all

Situation:
Wife’s sister recently passed - she was unmarried no children
2 properties combined value of approx 900k
800k in premium bonds, shares, savings accounts, pensions - it’s a real mess we are uncovering

My son was looking after one of the properties (landlord and all done via an estate agent) this brought in around £1k pcm

Am I right in thinking we will lose around 550k in IHT? Do you think there is anything we could do to bring this figure down?

I am assuming not it just doesn’t seem right to me but the. I haven’t been through this before so I’m new to it

Thank you

strawn
Posts:96
Joined:Fri Jun 01, 2012 10:11 am

Re: Where to begin

Postby strawn » Sat May 14, 2022 11:27 pm

unmarried no children
properties combined value of approx 900k
800k in premium bonds, shares, savings accounts, pensions

Am I right in thinking we will lose around 550k in IHT? Do you think there is anything we could do to bring this figure down?
Warning - amateur here.

(1) If by "pensions" you mean capital left within money purchase pensions: that can pass free of IHT to whomever she named to the pension company as beneficiary. (As long as the money is passed within two years, as I understand it.)

(2) So I assume her non-pension capital is less than £1700k. Anyway, with no direct descendants to leave residential property to, and no unused allowance from a late husband, then only £325k is exempt from IHT. So the tax bill will be less than 0.4 x (£1,700,00 - £325,000) =
less than 0.4 x (£1,375,000) = less than £550,000. That's what you said, apart from the possibility of a reduction for the pensions.

I don't know of any way of reducing the tax bill save for doing a deed of variation to direct some of the money to a charity (but then I am an amateur).

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

Re: Where to begin

Postby maths » Mon May 16, 2022 9:42 pm

Am I right in thinking we will lose around 550k in IHT
In short, yes.

This figure assumes that any pension amounts fall into her death estate; this may not be the case if she had nominated someone to receive such
amounts with the pension trustees having a discretion as to whether to pay monies to that person.

Unfortunately, as she has never been married (?) and has no children her estate qualifies for only one nil rate band (325k) and no residence nil rate band.

Had she written a will? If so, who were the beneficiaries?

If she died without having made a will (and no surviving spouse or children) then under the intestacy laws her estate will go to:

1. her parents absolutely |(equally if both alive)
2. if no parents, then to sisters and brothers of the whole blood.

The 40% rate can be reduced to 36% where a significant part (very broadly 10%) of her estate is donated to charity. I haven't done the mathematics to see whether this would be worth investigating. There may be a 2 year deadline from date of death to sort this out.

If the charity option is unattractive or not of any material advantage the only thing left is to claim to pay any IHT due over time (helps cash flow) and not all at once (ie 6 months after death).

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: Where to begin

Postby robbob » Tue May 17, 2022 8:49 am

I am assuming not it just doesn’t seem right to me
In what respects? tax being unfair ? - hmrc need to raise taxes to run the country - peeps can give away decent sums tax free - similar to higher rate tax (40%+) some taxes are higher than others.

At the end of the day beneficieries are still getting decent value here in sums of multiple hundreds of thousands plus - so i dont understand their beef - would i rather have 60% of £1 mill or nowt bit of a no brainer - those peeps should really be thankful for what they are getting in todays world.


Would an asset rich person (may not be cash rich?) rather face an annual tax on their "assets" or not have any charge and potentially be billled something based opjn wahts left (if owt) when they pass - i would guess 95% plus would vote for the current system rather than alternatives being put forward.

Note shares may qualify for IHT relief if "Aim" listed

https://www.investec.com/en_gb/wealth/our-offices/sheffield/using-aim-shares-to-mitigate-inheritance-tax.html


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

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