How can I avoid inheritance tax of £300,000 on £750,000?

Question

Hi everyone, got a slight problem here. My parents currently own an estate worth in excess of £750,000 - the problem is is that if I inherit it all - I have to give the tax man £300,000 (due to the 40% rate). This means that I would have to sell on of the properties in the estate. Does anyone know a simple way to get around this?

Regards,
AJ.

Answer 1

Tax is not charged on the first chunk of the estate (currently £285,000).

The first and simplest task is to make sure that you are left an amount at least equal to that nil rate band when the first parent dies (assuming this is possible).

Then, upon the second death, that person's nil rate band is also available. In this way you have utilised two lots of exemptions which at current rates would take £570,000 out of tax. The tax is now down to around £72,000.

The next thing to consider is - can your parents give you any of the estate now? (This will not be possible if they need the income from investments to live on) Any gift in excess of the annual limits will become a Potentially Exempt Transfer and will fall out of the estate completely after they survive foir seven years.

Otherwise, you are going to need specialist advice tailored to their circumstances.