Quizzes & Puzzles2 mins ago
Inheritance
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Ok we have been discussing this at work, and I think there is something that can be drawn up by a solicitor, which stops the taxman taking a share, when a property is handed down to a child on both parent's death. I think it is something to do with Inheritance Tax.. Can someone help us out on this please and explain it in layman's terms?
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You could be thinking of a Deed of Variation to the first will.
Basically, when a person dies having left everything to their spouse, there is no inheritance tax liability. If the spouse subsequently dies s/he has only one IHT allowance to use (currently £325k). The DoV allows the first person's will to be re-written in a more tax efficient manner, so that their allowance can also be used, which could reduce the liability.
Obviously there's a lot more to it than that single paragraph summary (and I'm an accountant, not a solicitor!), but if the estate is worth more than £325k then you could end up keeping up to £130k more out of HMRC clutches.
Basically, when a person dies having left everything to their spouse, there is no inheritance tax liability. If the spouse subsequently dies s/he has only one IHT allowance to use (currently £325k). The DoV allows the first person's will to be re-written in a more tax efficient manner, so that their allowance can also be used, which could reduce the liability.
Obviously there's a lot more to it than that single paragraph summary (and I'm an accountant, not a solicitor!), but if the estate is worth more than £325k then you could end up keeping up to £130k more out of HMRC clutches.
Yes much can be done. There is the nil rate band discretionary trust, which is often used and is intended to maximise the saving of Inheritance tax (IHT). Under the present rules anything passing to the wife or husband of the person making the will is free of IHT and this can be passed on to the other people benefiting from the will.
I have tried to put this in simple terms but it is a complex area of law and the wording must be correct to satisfy HMRC, do not try to write a will with a discretionary trust yourself, go to a local solicitor.
I have tried to put this in simple terms but it is a complex area of law and the wording must be correct to satisfy HMRC, do not try to write a will with a discretionary trust yourself, go to a local solicitor.
>>>If the spouse subsequently dies s/he has only one IHT allowance to use (currently £325k).
I thought if the second person dies they automatically pick up the 325k of the first person so the second person's ITax allowance is £650,000.
My father dies about 10 years ago and used none of his IT allowance.
My mother is still alive but lives in a house worth about £600,000 and I understood there would be no ITax on any of that as my mother and father;s IT allowance would be added together.
See "increased threshold" on the top of this page here
http://www.hmrc.gov.u...etax/intro/basics.htm
I thought if the second person dies they automatically pick up the 325k of the first person so the second person's ITax allowance is £650,000.
My father dies about 10 years ago and used none of his IT allowance.
My mother is still alive but lives in a house worth about £600,000 and I understood there would be no ITax on any of that as my mother and father;s IT allowance would be added together.
See "increased threshold" on the top of this page here
http://www.hmrc.gov.u...etax/intro/basics.htm
All I know is, if a husband/wife leaves everything in their Will to their spouse and nothing to his children, the children get a 'rollover' when the second spouse dies - e.g. double the £325k. But I need to know what happens when the children ARE left something in both spouses' Wills ... how can the children benefit from paying less Inheritance Tax if the parents' property etc is worth more than £650k?
I'm not an expert but am just going through a similar situation. Its not the children who are left something in the will that pay the Inheritence tax - its the dead persons estate, before anything is paid out to anyone - so if say the husband died and the wife was left 300K- and the 2 kids 50k each, (under the threshold of 125K) then maybe no IT would be paid? If the kids were left 100K each then 75k of that would attract IT, Which would be taken out of the dead persons 325K allownace , the remaining rolling over if you like until the death of their spouse.
When property is handed down, anything over the 125k threshold will attract IT which will have to be paid out of the Estate before its signed over to the child -but if the child then sells the property there may be capital gains tax to pay as well.
When property is handed down, anything over the 125k threshold will attract IT which will have to be paid out of the Estate before its signed over to the child -but if the child then sells the property there may be capital gains tax to pay as well.
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