Young widow, inherited inheritance tax allowance

[Softnatural]

DH died leaving me a young widow. There was no tax to pay on his estate becuase it largely comprised of our shared house, which passed to me outside of his estate and pension assets which were exempt.

It does however leave me with quite a high net worth (and hopefully a lifetime to use it, so there might be nothing left!)

I understand my own estate can use his inheritance tax allowance which, if it included property, essentially means up to £1m tax free, but is this indefinite? I might not die for another 50 years! Also, what happens if I remarry? No plans to, in fact quite the opposite to protect my DC's interests, but just curious.

You don’t say what sort of pensions you’ve inherited.
Simple if it’s DB and you get half of the income.
If it’s Money purchase pensions that involve investments, advice from an IFA could be a wise move, as you say, you could have 50 years to fund and needs change as you age.
Do you plan to take an income before you retire for example? As it stands all income is tax free at the moment as he was under 75, but things can and do change.

Are you able to manage your own investments?

You also haven’t mentioned life insurance, did he have it and was it written in trust so outside his Estate?
If not written in trust, are you Sure there’s no IHT involved?

There’s no IHT on anything passing to a surviving spouse.

If you keep all the paperwork from your DHs death, that will likely make things easier when your executor has to sort out your own estate in future.

I am sorry for your loss.

No, but you have young children. You need to sort out what will happen to them should you die or become incapacitated. It’s not just finances, it’s about guardianship as well. A family solicitor will help you to think about what you want to happen, and advise you on how to achieve that and secure your childrens future inheritance.

But remember, should you ever re marry, any will you have made becomes invalid, so if you do ever meet a new partner bear that in mind.

Sorry, I assumed since you said you were a young widow that your children were young, but I see they are adults.

If Life insurance is not written in trust and is above the IHT limit, IHT is due when the recipient dies.

Death in service payouts don’t attract IHT.

I asked one question. I didn't ask for advice on managing the money. In terms of investment return, I generally find I know more than most experts (having worked in the field for a long time).

The only life insurance was through work.

I'm not a lawyer but around about 6 years ago I was working as a legal secretary in probate. I remember an estate where they were able to use the nil-rate band for a first wife who had died 50 years ago and the husband's nil-rate band from just a few years earlier when administering the estate of the second wife. It was the current amount rather than the amount at the time of each death.

OP, pp Prh47bridge is a lawyer so hopefully the specific q you were pondering on is answered.

So sorry for the loss of your DH.

I forgot to add that when the first wife died, the estate went to the husband. When the husband died, the estate went to his second wife. When the second wife died it was being divided between the children of both wives.

If you leave funds in a pension to your children that will be free of inheritance tax. Also yes under current legislation you can use your husbands IHT allowance so including your property you could potentially leave £1 million IHT free. Legislation may well (probably will) change at some point in the future.
If you have significant other assets outside of the pension, which takes you well above the £1 million threshold and you don't wish to gift away now to your kids (if you are young understandably you wouldn't want to asd you will need these assets for yourself) and IHT is a concern for you, you could consider insuring againast the liability. In effect taking out a life policy, but placing it in Trust, so in the event it paid out, it wouldn't fall into your estate, it would pay to the beenficaries of the Trust and could be used to pay IHT bill.
If you remarry you could potentially have 3 nil rate bands for IHTs purposes that your estate could use (under current legislation). However if you remarry, IHT will probably not be your biggest concern, protecting your assets and ensuing a fair situation to all involved. This would then require careful estate planning.

Thank you, that's the question I needed and answer on. I'm imagining a system where I could have a dozen late husbands and a huge tax free estate 🤣 I'm aware the pensions aren't affected by IHT.

I agree that the biggest thing to be aware of will probably be legislative change. Keep an ear out over the years and if / when laws change consider whether you need to seek specific advice. If major changes are mooted then you might need to ensure you are "protected" by any transitional arrangements that might be made.

It seems like this is just a general discussion thread rather than advice seeking.

So you may be interested in staying abreast of political changes of government. Generally speaking, a left wing government is more likely to reduce or remove IHT allowances so that tax is due on more or all of the inheritance, with fewer ways to avoid (eg there is currently talk of the agricultural land exclusion being targeted by Labour). A right wing government (usually try for low tax regime, but also more popular amongst the older generations) might increase the IHT allowances.

But really, change could come in at any point to any effect.

The impact will be whatever tax rules are in place when you die.

Separately, remember a remarriage overrules any existing will automatically

If you are young, it doesn’t matter what the rules are now. They will almost certainly change before you die. If you are going to remarry, you need to redo your will after you have matted to protect your children. Marriage nullifies any will made prior to the marriage

It is better not to marry again in your position, OP. It is almost impossible to completely guarantee that your assets would go to your children rather than to your new husband if you were to die first. UK law doesn't seem to make provision for this.

The OP might have been a young widow, once, but her children are apparently now adults.

Fair enough, but the OP said she might well live for another 50 years, so based on that remark I assumed she was in her thirties. Though of course a fifty year old could well become a centenarian ………

I wouldn't, personally.
I think of it as being 20-40 but it's possible to be early 40s, expect to optimistically live another 50 years, and have grown up children.

Why? I work in corporate investment, not personal taxation.