Wills and inheritance tax...

[The_Abyss]

If they just gift the house but continue to live in it then it will do ***** all for IHT. It will be deemed a gift with reservation and effectively taxed as though they still own it.

 

[Maccapacca]

The inheritance tax limit (£325k) is per person receiving the assets,.

It's per estate

 

[Jokester]

Is there not some rule with the spouse able to inherit the whole lot tax free, but children can get upto the £325k each tax free when the first parent dies?

 

[DanTheMan]

As mentioned, I'd be more worried about massive care bills meaning that the home has to be sold rather than a worry about inheritance tax. I recently went through this with my Nanna passing and me being an executor. Her estate was nowhere near the tax threshold but we almost had to sell the house to pay for care bills before she passed away.

 

[csmager]

Is there not some rule with the spouse able to inherit the whole lot tax free, but children can get upto the £325k each tax free when the first parent dies?

If the spouse dies and leaves it all to the other, their unused nil-rate band passes to the other (so an effective £650k NRB between them for this tax year)

 

[Destination]

The inheritance tax limit (£325k) is per person receiving the assets, not the people dieing. So for example if the property and all other assets are worth £900k and assuming all three children receive equal shares then you would each get £300k which is below the threshold for tax.

If left to the children before death then it must be left 7 years before death otherwise it again becomes eligible for tax if above the threshold.

I would suggest speaking to a professional about it as there may be some ways around the threshold: For example structuring the will like this:

1) Each parent leaves 50% of the house to the children upon death and the remaining 50% stays with the partner. When this 50% is split three ways then it is likely to fall below the threshold.
2) When the second parent dies then there is only a further 50% of the original amount that needs to be left to the children and therefore it is likely to fall below the threshold when split three ways again.

This is completely wrong.

 

[Hades]

It's per estate

This is completely wrong.

I stand corrected.

 

[Dunks]

Worth looking into Trusts.

 

[Maccapacca]

As mentioned, I'd be more worried about massive care bills meaning that the home has to be sold rather than a worry about inheritance tax. I recently went through this with my Nanna passing and me being an executor. Her estate was nowhere near the tax threshold but we almost had to sell the house to pay for care bills before she passed away.

Quite and they are pretty hot with the avoidance on this one, I don't think the 7 year jobber worth anything if they can prove you avoided it.

I can't see why you can't just sell it all and give it away cash.

 

[csmager]

Worth looking into Trusts.

Not so much since Gordon Brown brought this in: http://www.hmrc.gov.uk/trusts/iht/ten-year-charge.htm

 

[Pawnless Endgame]

Ahhh thanks for the £3k/year explanations. I thought it must be a bit daft (and cumbersome) to declare routine stuff like pots of homemade marmalade, a trip out to the theatre (at their expense) and for the odd £20 Amazon code

 

[delta0]

I believe there is an issue in handing over a property to avoid IHT and them still living in it.

 

[booyaka]

So much awful "advice" in this thread. So many wrong and misleading statement it's scary!

Go speak to a professional (solicitor/lawyer) etc about drafting a will/IHT properly.

If you give your home to your children with conditions attached to it, or if you continue to benefit from the home yourself, this is known as a 'gift with reservation of benefit' and the gift won't be exempt from Inheritance Tax, even if you live for seven years afterwards.

You can continue to live in your home as your primary residence after giving it away, provided you pay a market rent to the new owner. Bear in mind that the new owner may have to pay Income Tax on the rent you pay them.

If you don't pay a market rent, the gift will be considered a 'gift with reservation of benefit' and the house may be subject to Inheritance Tax.

@ OP - tell your Dad if he's serious to get proper advice/information on his specific situation. Also bear in mind that not just IHT should be an issue, what happens if he goes into long term care etc.

 

[Vanilla]

If they transfer the property over and remain in the house and they have to pay a 'market rent' is that for a room or the whole place? What about if you all live in the same house?

Long term care is the big one these days to. A lot of people transferring a % of their property over to family just so they can't be forced to sell. Such a shame people are driven to this.

 

[Phantom Shadow]

If they transfer the property over and remain in the house and they have to pay a 'market rent' is that for a room or the whole place? What about if you all live in the same house?QUOTE]

The government page on gifts with reservation of benefit covers this. It says if parents gift to children and the children move in the whole property will still count is a GWR, however if they gift half the property and they move in and split all the bills in half then the half given would be a PET and the other half would go to the death estate as normal.

OP, assuming both parents wills leaves everything to the other in the first instance and then to you and your siblings if the other has already passed then currently that would allow a £650k IHT free estate assuming they had made no chargeable lifetime transfers or potentially exempt transfers within 7 years prior. Even if they had, anything between 3 and 7 years will gain relief so less IHT would be payable but would use up part or all of the nil rate band.

If the entire estate of both parents (house, savings, cars, furniture, clothes etc less any outstanding debts and funeral costs) is less than this then and not likely to increase over it then you don't really have much to worry about.

Something like planning for death is definitely worth talking over with a professional though as they will be able to give accurate advice given your parents exact situation.