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    Currently the legislation regarding inheritance tax says a person is exempt from their first £300,000 and the rest of their estate is taxed at 40%.

    Now my father and I have a dialemma regarding Inheritance tax after my mother recently passed away. The whole of my parents estate is in my fathers name, including the house and all of the bank accounts and investments, so potentially this may leave a problem.

    There is another part of this legislation that says if a man and woman are married, their combined estate is exempt from £600,000 as the man and wife are expected to own half of everything and each is allowed to have £300,000 exempt from tax (naturally the rest of the estate is then taxed as normal at 40%).

    In terms of current legislation, we are wondering now my mother has passed away, if we will be able to claim her half of the estate even though it was always in my fathers name so as to make the total figure exempt from tax £600,000. If my father was to suddenly pass away, the vast majority of his estate is going to be taxed at 40% and even if he gives away this money in 'gifts' it would only be exempt after seven years.
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    Do you really think that The Student Room is going to be the best source of advice for this issue?! Why not instruct the services of a Financial Adviser or an Accountant?
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    (Original post by MalcomNewMoney84)
    Do you really think that The Student Room is going to be the best source of advice for this issue?! Why not instruct the services of a Financial Adviser or an Accountant?
    It's not the place for this but someone may have an idea.
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    (Original post by baby sexy)
    It's not the place for this but someone may have an idea.
    Indeed they may...
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    (Original post by baby sexy)
    Currently the legislation regarding inheritance tax says a person is exempt from their first £300,000 and the rest of their estate is taxed at 40%.

    Now my father and I have a dialemma regarding Inheritance tax after my mother recently passed away. The whole of my parents estate is in my fathers name, including the house and all of the bank accounts and investments, so potentially this may leave a problem.

    There is another part of this legislation that says if a man and woman are married, their combined estate is exempt from £600,000 as the man and wife are expected to own half of everything and each is allowed to have £300,000 exempt from tax (naturally the rest of the estate is then taxed as normal at 40%).

    In terms of current legislation, we are wondering now my mother has passed away, if we will be able to claim her half of the estate even though it was always in my fathers name so as to make the total figure exempt from tax £600,000. If my father was to suddenly pass away, the vast majority of his estate is going to be taxed at 40% and even if he gives away this money in 'gifts' it would only be exempt after seven years.
    Okay, firstly, you've not stated it explicitly, but I'll assume that your parents were married (if they weren't, this doesn't apply).

    When a person dies, they have an 'nil rate band' (NRB) within which no inheritance tax is due. This is currently at £325,000 (it usually increases annually, and was £300,000 two years ago).

    If one partner in a marriage dies, some of this NRB may be used up in non-exempt transfers of their estate. Transfers to their partner in marriage are exempt, and will not use up the NRB. Any fraction of the band that is not used upon this first death can then transfer across to the surviving partner, and is added to their NRB upon the second death.

    Assuming that none of your mother's NRB was used upon her death, then 100% of this will transfer across to your father, giving a total 'tax-free' allowance of twice the NRB upon his death (this would currently be 2×£325,000=£650,000, but as above usually increases each year).

    Just as a note, at no point here is it relevant which partner in the marriage holds the assets, as transfers between married couples are exempt from IHT.

    Hope that answers your question - post again if you need anything clarifying
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    (Original post by Illusionary)
    Okay, firstly, you've not stated it explicitly, but I'll assume that your parents were married (if they weren't, this doesn't apply).

    When a person dies, they have an 'nil rate band' (NRB) within which no inheritance tax is due. This is currently at £325,000 (it usually increases annually, and was £300,000 two years ago).

    If one partner in a marriage dies, some of this NRB may be used up in non-exempt transfers of their estate. Transfers to their partner in marriage are exempt, and will not use up the NRB. Any fraction of the band that is not used upon this first death can then transfer across to the surviving partner, and is added to their NRB upon the second death.

    Assuming that none of your mother's NRB was used upon her death, then 100% of this will transfer across to your father, giving a total 'tax-free' allowance of twice the NRB upon his death (this would currently be 2×£325,000=£650,000, but as above usually increases each year).

    Just as a note, at no point here is it relevant which partner in the marriage holds the assets, as transfers between married couples are exempt from IHT.

    Hope that answers your question - post again if you need anything clarifying
    Thanks for that. It does indeed look like (under the circumstances) that the first 650K will be exempt from tax.
 
 
 
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