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Where Taxpayers and Advisers Meet

Variation of a will and inheritance tax

dinah50
Posts:3
Joined:Thu Jan 15, 2015 12:54 pm
Variation of a will and inheritance tax

Postby dinah50 » Thu Sep 05, 2019 6:38 am

Is there any advantage in varying my husband's will to pass on a property worth £330,000 to my son rather than passing it on to him directly.

I believe if I do vary the will I will lose my husband's nil rate band.

The total of my estate is approximately £1,500,000

The only advantage I can see in varying the will is that I do not have to live for seven years, or am I missing something?

Jholm
Posts:108
Joined:Mon Mar 11, 2019 4:22 pm

Re: Variation of a will and inheritance tax

Postby Jholm » Thu Sep 05, 2019 9:17 am

To clarify, is it left to you at present and you wish to make a variation for it to go to him directly?

The usual variance would be to make an asset pass to a spouse (thereby becoming an exempt transfer), then gifting to the other party as a PET, which would only become chargeable if death occurs within 7 years.

Making a variation away from the spouse stands to waste exemptions.

dinah50
Posts:3
Joined:Thu Jan 15, 2015 12:54 pm

Re: Variation of a will and inheritance tax

Postby dinah50 » Thu Sep 05, 2019 11:03 am

Yes it is left to me from my husband's estate and I was advised to vary the will but as I said the only advantage seems to be
that if I vary the will I wouldn't have to live seven years as in the case of a PET.

However, as it will use my husband's NRB, although I would no longer have his allowance on my estate, varying the will would lessen
my estate by £330,000 and as property is likely to increase in value, I could end up with an estate worth over 2 million and then I would no qualify for the property allowance of £175,000. The property I live in is valued at £725,000, and another flat of which I own half at £300,000. I am aged 82 and in good health.

maths
Posts:8147
Joined:Wed Aug 06, 2008 3:25 pm

Re: Variation of a will and inheritance tax

Postby maths » Thu Sep 05, 2019 1:10 pm

Generally speaking, it is advantageous for the first spouse to die to leave the estate to the surviving spouse. The surviving spouse then become in principle entitled to two lots of nil rate band (NRB) and two lots of residence nil rate band (RNRB). In a time of increasing NRB and RNRB the doubling of the amounts could be very attractive.

Based on your figures I don't think there is a short term likelihood of your net estate reaching £2m.

If you re-direct the property left to you by husband to your son, for the RNRB to apply your husband (and presumably you) will need to have at some time lived in it as a residence. If this is the case an RNRB would apply. At £330,000 this would mean RNRB of £125,000 (or £150,000 depending upon date of his death) would reduce his estate as would the next £200,000 of his NRB (leaving unused £125,000 of his NRB ie 38.46%). If no RNRB entitlement then his NRB would be fully utilised.

Other things being equal it may be better not to execute a DoV in favour of son thus providing you with two lots of NRB and RNRB on your death. In addition, by leaving your husband's property on your death to your son would give him a CGT free uplift.

Just keep any eye on the £2m.

strawn
Posts:52
Joined:Fri Jun 01, 2012 10:11 am

Re: Variation of a will and inheritance tax

Postby strawn » Fri Sep 06, 2019 1:18 am

One thing I'd turn over in my mind is the possibility of a Labour/LibDem government scrapping IHT and replacing it with an Accessions Tax aka Acquisitions Tax or Gift Tax.
This is (I think) already LibDem policy and is the subject of a Labour discussion. Presumably the families hardest hit will be those with fewest children or grandchildren, and those hoping to use features of IHT such as transferable NRB and RNRB.

If you think the risk serious you might decide that varying the will and getting the money/asset to your son before a General Election might be a good move.


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