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Inheritance tax question

If there are any tax bods on here please can you help me clarify the following situation to my parents.

My parents are due to inherit money for which inheritance tax will be deducted. If they were to decide that they wanted to pass some of this onto the children would there be any additional inheritance tax?

I had made them aware that on normal gifts there is usually a £3k allowance per year that would be tax free but anymore then that then inheritance tax would apply within the typical 7 year period. I'm not 100 percent certain whether this same law applies when passing on inheritance tax for which tax has already been applied?

Thanks for your help in advance.

Comments

  • Your parents could gift you any sum as you say and IHT would be payable by their estate if the donor parent died within seven years of making the gift. The fact that the money from which the gift has been made has been subjected to IHT counts only for the distribution from the deceased's estate and does not cover or "frank" any subsequent gifts,unfortunately.
    Maybe consider a deed of family arrangement(aka a deed of variation)if by inheriting the monies your parents' IHT situation is worsened ie it adds to a financial position where their estate would attract more IHT as a result. A deed could be drawn-up simply,and accepted by HMRC,to transfer funds from the deceased's estate directly to you and your siblings and so by-pass them,keeping the status quo for their own IHT situation.
    Please let me know if you would like more details or have other questions.
  • Your parents could gift you any sum as you say and IHT would be payable by their estate if the donor parent died within seven years of making the gift. The fact that the money from which the gift has been made has been subjected to IHT counts only for the distribution from the deceased's estate and does not cover or "frank" any subsequent gifts,unfortunately.
    Maybe consider a deed of family arrangement(aka a deed of variation)if by inheriting the monies your parents' IHT situation is worsened ie it adds to a financial position where their estate would attract more IHT as a result. A deed could be drawn-up simply,and accepted by HMRC,to transfer funds from the deceased's estate directly to you and your siblings and so by-pass them,keeping the status quo for their own IHT situation.
    Please let me know if you would like more details or have other questions.

    Thanks for that very informative answer, much appreciated. Will pass on the details and let you know if I have any other questions.
  • Just to note, for a deed of variation you actually need the agreement of all beneficiaries of the original will I believe.
  • edited November 2
    just to add to the above, there are many ways that your parents can pass on the money they have just inherited which could then be outside of their Estate - mainly by putting in into Trust (there are 2 really good Trusts that they could use, Discounted Gift Trust and a Loan Trust). Also bear in mind that everybody has an IHT allowance of £325k (so £650k per couple) and then there is another £100k, increasing to £175k by 2022, if you have a property & so will be £500k each by then. Therefore, assuming your parents don't own a huge property, their IHT bill may not exist in any case. I recommend you, or they, speak to a financial advisor.

    PS. The family of Diana, Princess of Wales used a deed of variation to avoid IHT after she died.
  • I know absolutely nothing about most things and this is no exception but my advice to anyone on inheritance would be to have an arrangement with the relevant government department, Duke of Westminster style.
  • I know absolutely nothing about most things and this is no exception but my advice to anyone on inheritance would be to have an arrangement with the relevant government department, Duke of Westminster style.

    Sorry to be nosey, do you live in Keston?
  • masicat said:

    I know absolutely nothing about most things and this is no exception but my advice to anyone on inheritance would be to have an arrangement with the relevant government department, Duke of Westminster style.

    Sorry to be nosey, do you live in Keston?
    No, Locksbottom/Crofton area. Nice and dull where nothing ever happens.
  • Also bear in mind that everybody has an IHT allowance of £325k

    425k isn't it currently per person (assuming a property)
  • edited November 2
    Rob7Lee said:

    Also bear in mind that everybody has an IHT allowance of £325k

    425k isn't it currently per person (assuming a property)
    Yes and no as I understand it!

    The nil rate band is £325,000 and is frozen at this figure until 5 April 2021.

    However there is an additional residence nil-rate band (£100k for tax year 2017/2018) which applies when a home is passed on death to direct descendants of the deceased on or after 6 April 2017.

    Any unused (additional my brackets) band is transferable to a spouse or civil partner and there is a tapered withdrawal of the band for estates worth more than £2m.

    In essence the extra is conditional although will probably apply to most practical situations in reality.
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  • Rob7Lee said:

    Also bear in mind that everybody has an IHT allowance of £325k

    425k isn't it currently per person (assuming a property)
    Yes, and amended my original post to clarify that point.
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