IHT/Probate etc

[NDA]

A friend's father is 96 - in good health (he was widowed about 5 years ago). He is, understandably, putting his affairs in order and is anxious about the tax bill his children will have to pay.

It has been calculated that IHT will be payable on around £250k of his estate. He is considering transferring some cash now so that his two children have the funds to pay the tax rather than paying the 7% interest to IHT whilst waiting for probate.

Good idea? Bad idea?

[98elise]

NDA said:

A friend's father is 96 - in good health (he was widowed about 5 years ago). He is, understandably, putting his affairs in order and is anxious about the tax bill his children will have to pay.

It has been calculated that IHT will be payable on around £250k of his estate. He is considering transferring some cash now so that his two children have the funds to pay the tax rather than paying the 7% interest to IHT whilst waiting for probate.

Good idea? Bad idea?

I would have thought it a good idea. They will then have the cash to settle the IHT and if he survives another 7 years the gift will be outside of IHT

[Rough101]

Best idea is to set up a joint account with enough money in it to wind up the estate and pay the IHT..

As long as its fully part of the estate to be divided up only on his passing, it’s not a gift, but will count towards IHT.

[Richard-D]

If he can gift them the money and is confident that they will leave it alone (I realise this may not technically be considered a gift but would look like one on paper) then that does have the benefit that it would reduce the size of the IHT bill if he lives longer than expected.

Or buy a farm.

[NuckyThompson]

I believe there are trusts that can be set up that become exempt from IHT within 2 years. So worth speaking to an accountant in regards to that

[Marcellus]

My father in law set his estate in order before he died….. he suspected he was going to die but didn’t tell anyone…… all he ever said was “when I die you need this file which is here”.

Inside it was everything;
- a full evaluation of his estate that he updated every three months.
- all account numbers and contact details.
- share portfolios etc etc.
- details of a separate bank account in which was the inheritance tax due based on the most recent estate valuation…

when we looked back at the statements we saw that on the 3rd March, June, September and December for the past five years he’d either deposited or withdrawn the funds to make sure that there was the exact inheritance tax liability plus £5k for his funeral (in his will he even said DO NOT SPEND MORE THAN £5k on my funeral)

Made going through the process of getting probate really easy and took all the pressure off selling the assets until my wife and her brother (the only beneficiaries) were ready to.

[NDA]

Thanks for the replies... I do get a bit confused with how this all works and the potential to make a mistake.

[andy43]

NuckyThompson said:

I believe there are trusts that can be set up that become exempt from IHT within 2 years. So worth speaking to an accountant in regards to that

100% this. It uses business property relief and shifts the 7 years down to 2. There are trusts that exist specifically for this eg Octopus - an IFA may be more used to setting this up than an accountant. Funds at risk etc and the growth may not be stellar but it works.