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Clare
Clare, Solicitor
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If my husband dies and leaves me our house and all possessions

Resolved Question:

If my husband dies and leaves me our house and all possessions (£450,000), and all our bank accounts and savings are are joint (£200,000), but he leaves a flat worth £250,000 to his children, will the estate have to pay inheritance tax on the flat?
Submitted: 2 years ago.
Category: Law
Expert:  Buachaill replied 2 years ago.

Buachaill :

1. There are two things you need to know here. Firstly inheritance tax is a tax on the estate. So the inheritance tax comes out of the money and property the estate of the deceased has available for distribution. Secondly, there is an exemption from tax up to a limit of 325,000 pounds. Above this limit, Inheritance tax is payable. Additionally, you should be aware that where there are joint accounts and savings the half which belongs to the deceased (husband), will pass under the right of survivorship to the other joint account holder, namely you.

Buachaill :

2. Accordingly, there will be inheritance tax payable on all assets above the value of 325,000. So, as the total assets in the estate will be 700k, this means that Inheritance tax will be paid on 375k of the assets. This will mean that part of the house you inherit will be subject to tax. So not only will the flat passing to the children be subject to inheritance tax, so also will the house and possessions be subject in part to inheritance tax.

Buachaill :

3. The way to deal with this situation is for your husband to make a Potentially Exempt Transfer (PET) during his lifetime whereby he gifts the flat to his children whilst he is still alive. At the outset, there is no gift tax on the transfer. If he survives the date of gift by seven years, then there is no Inheritance Tax on the transfer and the flat does not form part of his estate. This is one way to avoid Inheritance Tax on the flat.

Expert:  Clare replied 2 years ago.
Hi
Thank you for your question. My name is XXXXX XXXXX I will do my best to help you
The money and assets that pass to you are subject to a Spouse exemption, and the money in the joint accounts pass to you automatically.
Accordingly only the £250,000 is actually relevant for the assessment of Inheritance tax and since it is well within the £325,000 nil rate tax band you have no cause for concern at all
All of this is confirmed here
http://www.hmrc.gov.uk/inheritancetax/intro/basics.htm#3
Please ask if you need further assistance
Clare
Clare, Solicitor
Category: Law
Satisfied Customers: 33530
Experience: I have been a solicitor in High Street Practice since 1985 with a wide general experience.
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