UK Inheritance Tax

[Blue One]

Hi Guys

I wanted to ask if an estate of a deceased person in the UK is worth more than GBP325k, and anything in addition to this amount is subject to 40% tax. Does that apply 'at source' to the actual estate, or is it that when people inherit part of such an estate they pay GBP40% if their part is more than the GBP335k threshold?

If it is 'at source', what legally can be done within a family offset this whilst the person is still alive, so that when they pass on their family isn't loaded with a chunky tax bill - is a trust or some other arrangement possible?

Hope that makes sense

[thekingisdead]

At source, it’s the estate of the deceased that pays the tax, not the beneficiaries

[greygoose]

Best option in my eyes would be for the person to give money away whilst alive and actually see their beneficiaries enjoy it.

[Blue One]

Thanks, if that money is tied-up in the house they live in, can they give the house away to beneficiaries (their children) whilst still alive and continue to live in it?

[Andy 308GTB]

BPR schemes.
My parents IFA set up a portfolio of these for the funds in excess of the threshold.

https://octopusinvestments.com/resources/guides/bu...

[Abdul Abulbul Amir]

Blue One said:

Thanks, if that money is tied-up in the house they live in, can they give the house away to beneficiaries (their children) whilst still alive and continue to live in it?

Yes but they would have to pay the market level of rent to the new owners...which they may need to pay income tax on.

[Eric Mc]

Blue One said:

Thanks, if that money is tied-up in the house they live in, can they give the house away to beneficiaries (their children) whilst still alive and continue to live in it?

That is called "A Gift with Reservation of Title" and there are tax laws to try and make this very difficult (if not completely impossible).

[eliot]

For a married couple, if the first to die passes their estate to the surviving partner, the IHT allowance is combined to give you £650k
If the property is passed onto the children there is a further allowance too.

Basically die>death cert>estate pays iht>get code from inland revenue>obtain will>apply for probate>sell assets,pay debts>divvy up the remains

There is a catch22 - if you need to sell the house to release funds to pay iht - basically you cant until you pay the tax and you can’t sell the house until you get probate which you cant get without paying the iht.
https://curtislegal.co.uk/can-i-sell-the-deceaseds...

Edited by eliot on Friday 6th May 08:25

Edited by eliot on Friday 6th May 08:28

[Blue One]

eliot said:

For a married couple, if the first to die passes their estate to the surviving partner, the IHT allowance is combined to give you £650k
If the property is passed onto the children there is a further allowance too.

Basically die>death cert>estate pays iht>get code from inland revenue>obtain will>apply for probate>sell assets,pay debts>divvy up the remains

That's interesting, that is actually what happened in our case, so in theory because my mother died ten years ago, and just passed her share to my father, when he passes on, we could benefit from her allowance also?

Thanks everyone

[eliot]

Blue One said:

That's interesting, that is actually what happened in our case, so in theory because my mother died ten years ago, and just passed her share to my father, when he passes on, we could benefit from her allowance also?

Thanks everyone

Yes a married couple can pass their entire allowance to the surviving partner - less anything that may of given away under the 7 year rule.

[ApexCult]

Blue One said:

eliot said:

For a married couple, if the first to die passes their estate to the surviving partner, the IHT allowance is combined to give you £650k
If the property is passed onto the children there is a further allowance too.

Basically die>death cert>estate pays iht>get code from inland revenue>obtain will>apply for probate>sell assets,pay debts>divvy up the remains

That's interesting, that is actually what happened in our case, so in theory because my mother died ten years ago, and just passed her share to my father, when he passes on, we could benefit from her allowance also?

Thanks everyone

Couple of links here:

https://www.gov.uk/guidance/inheritance-tax-transf...

https://www.which.co.uk/money/tax/inheritance-tax/...

[eliot]

Didn’t realise that the Nill Rate Band allowance of £175k for giving the house to your kids is per person - so essentially you have £325 + £175 = £500k which can be combined, so you have up to £1mil if the allowances are combined and the property is passed to children.

https://moneytothemasses.com/tax/inheritance-tax/d...