Money
Our experts
The inheritance tax minefield
John Husband runs 'Money clinic' for Saga Magazine and has been writing about business and personal finance for more than 40 years. John is on hand to answer your money queries. Here is a selection of your online questions and others from Saga Magazine:
Q. Our daughter is getting married later this year. How much money could we give her as a wedding present without falling foul of inheritance tax?
A. If you are potentially liable to inheritance tax, the maximum permitted cash wedding gifts are £5,000 from each parent and £2,500 from each grandparent. Anyone else can give up to £1,000. To be exempt, the gifts must be given before the wedding ceremony, which has to take place. One way you can give more is by contributing to the cost of the wedding or the honeymoon instead of giving money to the bride or groom.
Q. My wife and two sisters are the legal owners of their mother's house. As they have never lived there, will they be liable for capital gains tax when their mother dies and the house is sold?
A. Yes, as they are not owner-occupiers they will be subject to capital gains tax. They will each be able to offset their annual capital gains tax exemption, currently £9,600, against that. However, this will only arise if and when the house is sold. If your wife and sisters were to review their position, I suggest a family get-together coupled with some professional advice is worth considering.
Q. My sister divorced her husband and he has not seen their son in 30 years. When he dies will she or her son be responsible for the funeral expenses?
A. The funeral expense is the first charge on the deceased's estate. If there is insufficient to cover it the next of kin would be expected to meet it. As your sister is divorced, in this case it is probably the son.
Q. What are the rules governing payment of local authority fees if you have to go into care and you still have outstanding debt on your mortgage? And who pays the care bill if you do not have the financial means to pay?
A. You are expected to pay for your care if your savings, including the value of your home, net of any mortgage or other debts, exceeds £22,250 in England (£21,500 in Scotland, £22,000 in Wales and £22,250 in Northern Ireland). But your home can't be taken into account if your spouse or partner is still living there. If you haven't got the means to pay, the bill is met by your local authority.
Q. What happens to Premium Bonds when someone dies?
A. They have to be cashed in, but they continue to be entered in the prize draw for 12 months from the death of the holder. So there is no rush. If the bonds have won any prizes there's no time limit on claiming them for the deceased's estate either.
Q. My wife and I both lost our respective spouses before we remarried. If our estate became liable to inheritance tax, how would this affect our situation?
A. You can each take advantage of any unused proportion of your late spouses' exemption limits. However, on your death your exemption limit can never be more than two tax-free bands, which for this tax year would be twice £312,000 = £624,000.
Q. When my husband and I married six years ago he had bought the house we now live in. But my name has never been put on the deeds. Should I get this done, or if he dies before me will I automatically become the owner?
A. No, not unless he leaves it to you in his will. If there is no will the rules of intestacy apply and there's a set formula for how someone's estate is shared between their next of kin. The only way you'd automatically become the outright owner is if your husband puts it in joint names.
Q. Our grandson started a three-year university course in September last year and we are finding it a struggle to help him out financially. He didn't get a grant but we read in a newspaper that grants will be available for most students starting this year. Will this help him too?
The grants this year are more generous with a full grant of £2,835 available to students whose parents' income is less than £25,000 and some help if their income does not exceed £60,000. The grants for continuing students are less generous but can be up to £1,030 where the household income does not exceed £30,000 and £504 up to £35,000. I trust that he is taking full advantage of the Student Loan scheme. The interest charged on an outstanding loan equals the rate of inflation, making it very cheap money indeed.
Q. My husband and I both have children from previous marriages. I have four and my husband has two. The gift allowance is £3000 per year to our children. Does this mean all the children must share the £3,000 or can I give £3,000 between my four children and likewise my husband gives £3000 between his?
A. For inheritance tax purposes the annual gift allowance is £3,000 a year per person. It is entirely up to you who receives it. So in your case your children could share £3,000 between them and so could your husband's. The allowance can be carried forward for one year only. So if you gave nothing last year you could gift away up to £6,000 this year.
Q. I reached 60 in 2005 and decided to defer my state pension until I turn 65, two years from now. I have worked all my life, and paid in the full amount, and from the figures I obtained this should result in a significant increase in my pension or a lump sum. I am now wondering whether this is still a good idea or whether I should take it now and run?
A. Unless you are in excellent health and have no need of the money I'd be tempted to take the money now and enjoy it while you can.
Q. When my husband died two years ago he passed £275,000 to our two children to take full advantage of the inheritance tax exemption limit. What will be the situation as regards inheritance tax when I die?
A. As your husband's exemption limit has been used up, you have only the use of your own exemption limit, currently £312,000. If your estate is considerably more than that it may be worth seeking professional advice.
Q. I live with my mother who is 85 and receiving the higher winter fuel payment. Having reached my 60th birthday, am I eligible for an extra winter fuel payment too?
A. The payment is per household, not per person. If someone in the household is over 60 you get the normal winter fuel payment, and if someone is 80 or over you get the higher payment. As you are now over 60, the sum will be shared between you.
Q. I have been receiving a widow's pension for 10 years. Will I lose that when I am 60 and start to receive my own state pension?
A. Yes. When a widow reaches pensionable age she will get a basic State Retirement Pension of at least the same amount as her basic Widow's Pension.
* Email John your personal finance questions at web.editor@saga.co.uk. John's opinions are his own and for general information only. Always seek independent financial advice.
- John Husband answers more of your personal finance questions
- Paul Lewis' guide to inheritance tax
- Getting the best deal: how to cut the cost of living
- Paul Lewis on the web: read Saga Magazine's money expert online
