Hi
My father recently passed away and my mother is struggling to cope with the size of her property. However, if she downsizes, what is the situation with regard to inheritance tax? Her current property would be valued at approximately £350k which would equal her IHT property allowance when combined with my father’s, but the new property may be over £100k less. Is there a way she could still benefit from the full £350k allowance, otherwise she risks falling into the grasps of IHT with regard to the rest of her estate, having too much cash after liquidating some property value.
Another consideration is that she was either going to complete a deed of variation to redirect the non-joint part of my father’s estate (the residual estate) to myself and my sister, or take the estate herself as named beneficiary and then gift us the equivalent (to potentially benefit from reducing IHT due to taper relief if applicable, although she is 80 years old). However, she may now need to use those funds in the short term to fund a cash purchase of a new property. Even though a deed of variation has 2 years to be completed, and I believe can still be used even after finds have already been distributed, if my mother used the funds to purchase property, and replaced them once her old property was sold, would a deed of variation still be effective in passing the funds to myself and my sister as if from my father’s estate, despite having being claimed and used temporarily by my mother?
Many thanks
Thank you for your reply. Just a query on the deed of variation issue if I may… I understand that it would permanently reduce the IHT allowance available to pass from my father to my mother if a deed of variation was to be used instead of my mother gifting the funds from her receipt of the residuary estate. However, my primary concern is whether a deed of variation can still be applied to my father’s estate if my mother has in the interim accepted the funds as beneficiary and used them temporarily to part fund a property purchase. If she thereafter replaced the funds by selling her original property (quicker and easier to move into new property before preparing original one for sale), would a deed of transfer still be effective so that her subsequent transfer of the value of my father’s residual estate to myself and my sister would be successfully treated as if we had been originally named as beneficiaries in my father’s will and would not be treated simply as a gift from my mother?
Many thanks for taking the time to respond.
