Property inheritance planning, have you made provisions?

July 12, 2019

With property at such a premium and instability still, a factor Enable’s IFAs in Bishop’s Stortford talk to many clients about property inheritance. Passing on a home to your loved ones, spouse, children or grandchildren is often part of peoples financial planning or inheritance tax planning.

Property inheritance

Some of the rules around property inheritance are fairly simple. When you die you can pass your home to your husband, wife or civil partner with no Inheritance Tax to pay. If you leave your home to another person in your will it counts towards the value of your estate. Currently, if you own your home your tax-free threshold can increase to £475,000 if: you leave it to your children (including adopted, foster or stepchildren) or grandchildren and your estate is worth less than £2 million.

Enable’s IFAs meet many people who in their financial planning are exploring giving away a home before they die. You can do this and there is normally no Inheritance Tax to pay if you move out and live for another 7 years but of course, many of us want to remain in our homes as we grow older and it can get a bit complicated.

It tends to be called a Potentially Exempt Transfer (PET) in the financial world. Should you wish to gift your property to your children and continue to live there you will need to: pay rent to the new owner at the going rate (for similar local rental properties), pay your share of the bills, live there for at least seven years. At the moment, however, after three years, the tax amount falls by 8% each year from the full rate of 40%, until the eighth year, after which the property is out of your estate for IHT purposes.

Enable’s experienced IFAs in Bishop’s Stortford are happy to help you look at all your options for financial planning for the future.

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individually tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain.

Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency.

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