IHT - complicated

[Blueberrycheesecake1]

Hi all

My partner and I are in an unusual situation. He has two daughters from a first marriage (now self-supporting working adults) and we have a child together (with another on the way).

We need to write wills and want to be fair to all.

My proposal is:

For my partner: Splits all assets between his children and me (ie 5 ways). The family house cannot be sold until our youngest is 21. (Only a small amount of his assets is tied up in the family house as I own most of it).

For me: Leave my share of the family house to our two children with my partner having the right to live in it until he dies. Rest of my assets go to him. I want to ensure my assets are ringfenced for my children as his children will be receiving a lot from their mother.

Aware there might be CGT implications in some of this? Anything else worth thinking about or is there a better way to structure this?

This is very complicated and it's taken us some time to think of this possible solution, so very grateful for any comments.

Thanks a lot for any help!

Is it IHT or CGT that you are thinking about?

If you are not married and the estate is liable for IHT when the first person dies, you may want to consider how you will meet the tax bill without selling the house.

Thanks for your response! Yes Iht is a problem and am thinking of suggesting marriage to resolve that (how romantic!). But I also thought there might be some cgt implications too possibly?

So really the title should say wills not IHT i'll try change it...

If you died first, your children would pay CGT on any increase in their share of the house’s value between the date of your death and the date they sold it (less their individual yearly CGT allowances).

Not an expert though so might be wrong! I also don’t think paying a bit of tax on such a large asset is a bad thing...

I don't know much about CGT but I do think Fleur is right about the increase in value being the basis of CGT. What happens if you partner dies when the youngest child is under 21? Does it have the same restriction for him too?

Yes, marriage would really help with the IHT tbh and possibly even the house value although if you hold it with different percentage splits I'm not sure. I'd seek proper advice.

If you pass all your assets (bar the house) on to your partner/DH how will you ringfence them for your children? Surely they will just pass to all four children via his will?

The restriction on the sale of the house - it would stop any relocation for work, etc. Do you really think that bit is necessary?

Thanks, good to know. I think the main drive is to prevent instability for our children if one if us dies. The reason it's until 21 for me but life for partner is that he is older and his daughters would have to wait a long time for me to die!

The cgt is a bit of a pain though, will need to look into that more...

Very difficult to structure something that works for all! Any ideas very welcome!

My assets are very small other than share of house !

I wouldn't bother trying to avoid the CGT - 1) it's such a what if scenario 2) They will able to pay it out of the proceeds of the house sale anyway, there's nothing inherently wrong with paying tax (it's how public services are funded after all.

But if it makes you feel better, date of death valuations tend to be quite low. We inherited a house and ended up paying CGT on the difference rather than IHT on the sale value (often there would be an adjustment to IHT once the house is sold, but as it was more than a year between death and sale we were able to pay CGT anyway) and it was much cheaper than the IHT would have been on the sale value.

But I do have the same queries as Cotswold Strife - I think someone with experience in this area would be able to help you word a will that achieves what you want without being a millstone around the survivors' necks.