Will Advice

[starfishenterprises]

DH and I are going to the solicitors to update our wills. Everything to eventually go to our only child (an adult!)

we have the following assets:

jointly owned house worth approx £350k

I own house worth approx £250k and have approx £100k in savings

DH owns a house worth approx £250k and has approx £200k savings

so approx £1.1 or £1.2 million.

we don’t know if it is more IHT advantageous to leave each of our joint home, the house we each own and our personal savings to each other or to leave straight to our son?

The will would give the surviving spouse a lifetime right to live in the family home.

Any advice on what the most tax advantageous way for us to set out our wills would be much appreciated!

if you're married/civil partnered does it make much difference - the IHT threshold is currently 1 million for married couple leaving family home to children.

If you leave your savings to each other then they could be used for care fees, remarriage, attract IHT again etc

That is where I get confused. Individually we are both worth less than £1m so is it better to leave our assets to our son directly rather than to each other first?

The £1m is an accumulation of yours and DH’s individual £325k nil rate band and £175k each for leaving your house to your descendent.

Individually you can each leave your Ds £500k if it includes house / share of house.

Between a married couple the second to die accumulated their spouses allowance if not already used.

Remember that from 2027 your pension is counted as part of your estate and added in with IHT liability

Leave to each other then gift one of the houses to DC, hope to survive 7 years and then no IHT. Does require some trust that the other won't remarry or change their will.

Don't forget to add in pensions in your total assets.

The £1 millions tax free allowance is combined between you and your husband.

each person has a £325k personal allowance, then you you each have up to £175k each for the residence nil rate band, you are only entitled to receive this if you leave your home to a direct descendant.

Everything left to a spouse is tax free.

If you left everything to each other and nothing changes then £200k would be taxable at 40% = £80k

However, a house is an appreciating asset (usually!) So you would expect the values to increase.

The easiest thing to do is to make gifts to your son now. If you survive more than 7 years from the date of the gift then this amount will not be counted for your inheritance tax calculation.

It is also worth noting that from April then the value of your inheritable pensions become liable for inheritance tax. This may change the calculation significantly- especially if either of you had a large pension pot that would push the total value of your combined estate to more than £2 million.

These are all things your solicitor should be able to discuss with you at your first appointment.

Go armed with a list of scenarios and questions, you are paying them for their time so make the most of it 😊

N.b only your main residence is eligible for the £175k nil rate band. Not your other house.

Also, if you were, for example, to give your other house to your Ds it will still be included for IHT if you continue to benefit from it. E.g if you put your other house in Ds’s name you cannot continue to receive rental income from it.

"Any advice on what the most tax advantageous way for us to set out our wills would be much appreciated!"

As a previous poster mentioned, if that is your primary concern then you should look at giving one of the houses to your child now or in the near future.

As long as you survive for at least seven years after the gift then it will not be included in your estate and so reduce the value of your estate when you die.

If the house you give to your child is not your primary residence then there will be CGT at either 18% or 24% to pay on any uplift in value between when you bought it and when you gift it to your child. But this will likely be less than having to pay 40% IHT on the full value.

I dont know how old you and your husband are, BUT

1. You need professional advice
2. What is your childs housing situation, clearly being a home owner now is worth more than squillions in the bank later
3. Then there are all the issues associated with managing a BTL property clearly if you could hand one over to your child that gets rid of one management job and gets them housed

Anyway thats my pennyworth

How old are you, are you both currently healthy and what do you each have as income? I would expect your first priority to be ensuring that your spouse can live comfortably, your second to be that you can cover care costs when needed and then maybe gifting something to your son now. But if you are both young, healthy and your child does not have a home of their own yet those priorities would change.

Agreed

I think you need to start with some financial planning for your future first

That in turn will drive what happens with your will

CGT would be payable on the gifted house though.

Thanks for all the help. To answer a few questions. We are retired and in our 80s. Living another 7 years probably unrealistic (although I hate to put that in writing). Son has own home and is financially comfortable. Agree we need proper advice but just trying to get my head straight first so I know what to ask them!

And I know we should have got our ducks in a row sooner but we are where we are.

If your son is financially comfortable then might I suggest (if you're both physically capable) that you spend some of that excess money which is above the IHT limit of £1 million on yourselves?

I don't know what your interests are, but why not indulge yourself in a holiday or something else that you would enjoy?

Just a personal anecdote here, my parents are in their late 80s. When they were in their early 80s they decided to splash out on first-class air tickets to go and visit my uncle (my mum's brother) in Australia who they hadn't seen in over 20 years.

My dad has mobility issues and wouldn't have been able to sit in an economy seat for that length of time, so they splashed out on first class. They stopped over in Hong Kong and enjoyed visiting there (although my mum didn't really like the local food).

They spent some time visiting my uncle and then returned home. My uncle died the following year and if my parents had hesitated about taking the trip then they would have never met up again before his death.

I do believe that it is worthwhile considering what you want to do and what dreams you might still have.

Well at your ages it is possible that either care home costs for one or both of you or paying for private medical care to avoid discomfort on long waiting lists will reduce what you leave to below the IHT threshold.

What you can do is first make use of the IHT exemption that allows each of you to gift 3k to your son every year free of IHT. If you didnt do this last tax year you can do one back year. If he has children they can be gifted £250 each. You can also gift any amount of money free of IHT if you do it out of income and can demonstrate to the tax man it didnt affect your standard of living. You could also employ your son to manage your properties and pay him for that.

Any amounts you spend now you could e treated as still having if the local authority ever need to pay for your care. It's called deprivation of assets and you need advice on that as well as IHT.