Q. My Aunty died recently and left me all of her £200,000 estate. However, I have enough to see me out and would prefer it if the £200,000 went directly to my children. I am free to give the monies to them without paying any tax aren't I?
A. Yes you are. You could simply pay over all of the monies to your children once the estate has been administered and there would be no tax payable at that point. However, it is important that you appreciate that, should you die within 7 years of that gift, the Revenue would add the £200,000 back into your estate and, depending upon what your own estate was worth at your death, it may be that Inheritance Tax (I HT) would be payable then. In order to advise which is more appropriate we would need clarification of your own financial position?
Q. Actually, I am concerned about IHT as, if you add my Auntie's monies to my own this would give me an estate of £500,000. This is £175,000 over the current IHT nil rate band of £325,000 and this would result in my children paying IHT at 40% on £175,000 (equivalent to £70,000 in tax). Whilst I'm all for paying my fair share of tax, this does seem an awful lot and I wonder if it is possible to do anything to reduce this liability?
A. Very easily. You are entitled to vary your Auntie's will so as to leave her monies directly to your children, thus missing you out completely. Provided this was done within 2 years of your Auntie's death, the Inland Revenue would regard this as being a gift of your Auntie's £200,000 directly your children. As your Auntie's estate is below the £325,000 threshold, no IHT would be payable on her estate. Similarly, upon your death (assuming that your estate remains at £275,000) no tax would be payable either as your estate also benefits from a nil rate band allowance of £325,000.
IHT can be complex with much depending upon the circumstances of each individual case. For specialist advice contact Keith Swan of Patterson, Glenton & Stracey Solicitors by email at ks@pgslaw.co.uk or by telephone on 0808 231 7043. Patterson, Glenton & Stracey Solicitors have provided legal advice to the people of South Tyneside for over 125 years. For details of their full range of services and to view previous Gazette articles please log on to www.pgslaw.co.uk . Patterson, Glenton & Stracey Solicitors: the Logical Answer.
