Inheritance planning everything going to my young kid

[PostHeads123]

I never really looked / understood inheritance tax but now very worried after looking at it and the potential bill. Im not married but live with partner and son and I own the house in my name. I'm in ill health with and may be have max 3yrs by which time my son will be 10. I intended to leave everything to my son but using online calcs the inheritance tax due would be £390k, how on earth would my young son pay that ? The cash I have and would leave him wouldn't cover it and I don't have life insurance.

I know I need to get proper legal / financial advice, I've read about trusts etc but I find it all so confusing. Should I be talking to just a Will solicitor or should I go to a different type any recommendations? Is a trust the best way to do it if I'm leaving it all to a young kid ?

Thanks

Edited by PostHeads123 on Sunday 25th February 15:53

Edited by PostHeads123 on Sunday 25th February 15:55

[eliot]

Inheritance tax is paid out of your estate before the beneficiaries receive it. Also you get an extra 175k allowance for giving the house to your child - although not sure how that works with a 10 year old.

[dalenorth]

Sorry to hear about your circumstances. As you have said it would be wise to seek some specialist advice and maybe look at marriage and trusts.

You say you don’t have life cover which is a real shame, but if you are employed just double check that you don’t have death in service with your employer (if you have one).

[Pit Pony]

Is your son also your partners son ? I guess not otherwise you'd leave it all to your partner......

And why don't you get married, and them your partner will be entitled to certain death benefits ?

[SuperCharged V6]

You need to discuss will options, have a trust in there, so that money/property can be managed for him by adults until a date you choose 18/21/25 etc

In addition, it is worth knowing that the IHT bill is payable anyway, it is just how it is paid. It is paid from the estate prior to probate being granted, the additional problem this gives, is that your estate is locked until the bill is paid. A solicitor may be able to negotiate longer term payments against the house, until it is sold, but likely interest will apply.

You will have a nil rate band of £325k and a further £175k for main residence nil rate band ( assuming you have a house worth more than £175k) so 40% payable over £500k

[Sheepshanks]

Will whoever is going to be looking after your son need financial support either for themselves or for your son?

[anonymous-user]

Sorry to hear about your circumstances.

Get some proper advice asap, this is not advice but some investments like SIPP aren’t subject to IHT a good advisor will save your son a lot of money.

[Happy Jim]

Certain AIM investments only need 2 years to qualify as IHT exempt.
Get married (and will trust for your son)

Defo need professional advice

[C69]

Sorry to hear about your situation.

As a general rule, children can be named as a beneficiary in wills, but they can't inherit until they're at least 18 (or older if you prefer). Until then, the assets will have to be looked after by a trust.

As others have already said, professional advice is necessary in your circumstances. I'd suggest using the STEP web site to find somebody near you who specialises in succession planning: https://www.step.org/about-step/public

[jesusbuiltmycar]

Sorry to hear your circumstances- one extra thing to consider is that if you have any pension pots they can be passed on to you son outside of the estate.

[Ari]

Happy Jim said:

Certain AIM investments only need 2 years to qualify as IHT exempt.
Get married (and will trust for your son)

Defo need professional advice

If his intention is to leave everything to his son, how will getting married help? He can't marry his son.

[Mr-B]

Ari said:

If his intention is to leave everything to his son, how will getting married help? He can't marry his son.

Everything left to his son in a trust with the wife as life tenant, the estate qualifies for IHT exemption as he is survived by a spouse so no IHT payable immediately only on the spouse's death.

[MG-FIDO]

Mr-B said:

Ari said:

If his intention is to leave everything to his son, how will getting married help? He can't marry his son.

Everything left to his son in a trust with the wife as life tenant, the estate qualifies for IHT exemption as he is survived by a spouse so no IHT payable immediately only on the spouse's death.

I've no idea what the situation is here, but assuming the OP wants his son to receive everything (perhaps his partner's finances are in good shape anyway) and assuming the partner might be 20-30 years older than the son, wouldn't this life tenant idea leave his son likely to wait many decades before he could sell the property and benefit financially from the inheritance?

[Mr-B]

MG-FIDO said:

I've no idea what the situation is here, but assuming the OP wants his son to receive everything (perhaps his partner's finances are in good shape anyway) and assuming the partner might be 20-30 years older than the son, wouldn't this life tenant idea leave his son likely to wait many decades before he could sell the property and benefit financially from the inheritance?

No, you can have the trust terminate when the child reaches a certain age (18 to 25) They would still need to consider the spouses finances before using this idea, it's not straightforward but might be worth considering.