"Death tax" - What's the current position in England?

[200bhp]

My family and I have lived in Australia for a long time but my parents (both 80+) are still in England, along with my brother and his family. I recell when I was a teenager than my grandparents started disposing of assets and money in order to avoid "death tax" - They paid for us to go to university, wrote cheques for all their grandkids on every occasion possible etc.

At the time I remember my parents being somewhat cynical, saying it wouldnt make a difference and "death tax" would catch up with everyone eventually.

When my grandparents died they left everything to their two children, my Dad being one. His sibling got the house and my dad got "shares and money" to the same value. I dont remember any discussion about "death tax" at that point, but assume someone had to pay something.

My parents idea of an investment is putting money into one building society account, so I'm not sure they really have a good grasp of things like this.

Here in Australia, there isnt a death tax.

What's the current situation in England? Should my parents be following in their parents footsteps and disposing of assets? If one of them ends up needing to go into a council run home, is is correct that they make you sell your family home to pay for it?

[Mr E]

40% of estate value over threshold
Threshold is 325k, with an additional 175k allowed if there’s a property transfer to close family.

Loads of additional rules/exceptions (farms are exempt, why do you think celebs buy them), but that’s the crux of it.

Gifts have a 7 year taper (if you live 7 years after giving them, they don’t count as part of your estate when you die) so no giving it all away in the final breath.

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

[Happy Jim]

And the threshold is “per person” so broadly £1m exempt, so it really depends on what assets they have.

Jim

[Steve H]

200bhp said:

What's the current situation in England? Should my parents be following in their parents footsteps and disposing of assets? If one of them ends up needing to go into a council run home, is is correct that they make you sell your family home to pay for it?

For state funded care you need to have total assets below a certain value, around £20k I think but someone will confirm. There are some rules around when they can or cannot make you sell the house but ultimately the minimum applies to pretty much all assets so if IHT is a concern then your parents are likely to be paying for any care themselves.


As suggested above, the joint allowance on IHT is broadly £1m so if their total value of savings plus house etc is over that they could consider some ways of reducing the eventual tax bill.

[alscar]

I think the figure is £23,250 below which you don’t pay for care.
If one partner needs to go into a care home the council cannot make you sell the house assuming the other partner continues to live there.
They also cannot take a charge over it.
As such the house is also not considered part of the asset base of £23,250.

[omniflow]

Happy Jim said:

And the threshold is “per person” so broadly £1m exempt, so it really depends on what assets they have.

Jim

Yup - and the thing to remember here is that if a person leaves their entire estate to their spouse then the spouse also inherits the IHT exemption. That's where the £1m comes into it.

So, husband dies, leaves everything to Wife, no IHT to pay as there is no IHT between married couples.
Wife then dies and assuming there is a house worth over £350K that is being left to children or grandchildren (I think), then an estate up to £1million is totally free of IHT

I can't see if anyone has explained this already but "Death tax" is called Inheritance Tax which is normally abbreviated to IHT

[Grandad Gaz]

I notice the OP mentions council run care homes. I thought they were all sold of years ago?

[Simpo Two]

omniflow said:

Wife then dies and assuming there is a house worth over £350K that is being left to children or grandchildren (I think), then an estate up to £1million is totally free of IHT

The word 'Trust' just floated into my head as a possible vehicle to assist, but you'd need to talk to someone who knows about them because it can get complicated.