Inheritance tax

[Marnie54]

I understand when I die, my son will get a tax allowance of £325 going up to £500 as he will inherit my home. When my partner died, the solicitors doubled up on the tax allowance for probate as his previously deceased wife left under the £325 allowance. My ex-husband died recently and I wonder whether my son could use the £325 allowance from my ex husband's estate which was not needed. I seem to be getting different answers from different solicitors so thank you for any help. I don't see why I should again be taxed on money I have already paid tax on. Thank you.

You forgot the 'k'

Not a tax expert, but reasonably informed.

It is the estate that has the IHT allowance, not the person who receives it.
You can combine allowance between married people, but not between unmarried.

So no, your exH's estates unused allowance can't be transferred (unless he remarried).

Who did your exH leave his estate to?

Oh you did make me smile, of course, I left off the 'K'! He didn't have much to leave, didn't remarry, any monies went on nursing home fees then local council paid, so nothing left really and no Will. Thank you for replying.

There are ways you can reduce your IHT liability.

One is giving funds away 7 years or more before your death, though you might have to watch for the intentionally depriving yourself of assets for care purposes.

There are various schemes for putting capital 'outside your estate' - talk to a financial advisor.

You can give 10% of your estate to charity in your will (I think that might be 10% of the amount above the IHT threshold but not sure), which then reduces the IHT from 40% to 36% (or something like that).

Basically, if your estate is big enough for IHT there may well be ways to avoid it if you get advice early enough, provided you are willing to relinquish some control over funds.

So, on the facts you've presented, no. As you were divorced when he died.

You want not be paying tax on money you've already been taxed on. A great deal will be increase in property value which has not been taxed. Plus the estate pays it, not you, and whoever benefits will not have personally paid tax on it.
Plus there's £325k tax free which is a lot, more than the vast majority of people will leave when they die. Only about 5% of estates attract IHT anyway.

You can also give gifts free of IHT

• £3000 yearly
• £250 x as many as you want out of excess income
• money on marriage to children or grandchildren

Thank you both for kindly replying. It seems to be a minefield but I will have to do some homework. Thank you for all the information which I will keep.

You can also give regular gifts from income that do not reduce your standard of living, of as much as you want. And 'regular' could be yearly, weekly, whatever (my mum gives each grandchild £250pm).

Thank you for your reply. This is all such useful information. Thanks.

We gave our DD a huge amount for a house deposit. Hopefully we won’t die in the next 4 years! (We gave it 3 years ago!). You can give a lump sum if you have it. We do have plenty left.

I inherited from a family member and the estate paid IHT as required. My inheritance is now part of my portfolio. If my DH and I died together and IHT was due, as it would be, my estate would include my inheritance. It’s mine now so it’s irrelevant that it came from an estate which had already paid tax. They are separate. Yes, I could continue to give assets away and put assets into trust but as said above, you lose control. We take the view our DC need money now, not when we die. We also want to minimise IHT.

In fact recent stats indicate less than 4% of estates attract IHT. And it’s decreasing.

Thank you for replying, all welcome information.

You need have been married at the time they died to benefit for their allowance

No, we were divorced years ago. When my partner died two years ago, the solicitors/executors claimed relief twice, once for him and once for his wife (who died some years ago) and her estate was below the threshhold. So the allowance on his estate came to £650k when he died, so no inheritance tax was due. As he left me his house etc, I realise if I now sell the house, I will have to pay capital gains tax on profit - I am renting out the property - but I want to minimise the tax on my estate so my estate doesn't get a hefty bill which is why I wondered if my estate could benefit from my ex-husband's estate not using his allowance. I want to help my son as much as I can. Thank you everyone for replying.

The 325k which is non taxable is called the nil rate band. A spouse can claim the unused portion of their predeceased’s spouses nil rate band. But as you were not married at the time of your ex husband’s death this is not available.

This HMRC guidance explains how it works.

Thank you for the information. I shall have to do some homework and look at the HMRC guidance. Many thanks for replying.

@Marnie54 you now own that property. Therefore your exes IHT allowance is now irrelevant. It is your allowance that you need be concerned with.

You have an individual allowance of £325k plus up to £175k on your residential property.

It sounds like you also own your exes property which would attract IHT if it takes your estate value over 500k.

I think you need independent financial advice. They may be able to mitigate the tax paid upon your death.

Yes, I understand that, it was my ex partner's property left to me not my ex-husbands, he didn't own a property although we divorced years and years ago. I was thinking about putting that house in my son's name - and me hopefully lasting seven years - but as a previous correspondent mentioned, I would lose control of it. Although I do trust my son, he is not yet married and that is another consideration. Yes, you are right, I need some professional advice. Thank you for your reply and information.

@Marnie54 re: him not being married yet if that ever arose he could get a deed of trust set up to protect him.

Yes, it needs a lot of sorting out with so will investigate further. Thank you for replying and for the information, a good point.