UK Will, Inheritance Tax, UK Trust.

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Granite
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UK Will, Inheritance Tax, UK Trust.

Postby Granite » Thu Apr 30, 2015 4:07 pm

I have a UK property that is left to my two children (UK tax resident) under my UK Will. The UK property is let and has been declared on Modelo 720. The rental income is declared in Spain. Therefore on my death no Spanish Succession tax would be due on the UK property. No problems - apart from my death!
If I were to modify my Will and leave the UK property in trust to my children with the rental income paid to my wife (Spanish tax resident) until her death, may this cause any problems with the Hacienda? I presume with the greater visibility the Hacienda should have on overseas assets questions are likely to be asked when estates are dealt with. I have no idea what evidence they may require or accept but adding the concept of a UK trust may be a bad move?

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chrissiehope
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Re: UK Will, Inheritance Tax, UK Trust.

Postby chrissiehope » Thu Apr 30, 2015 10:55 pm

I strongly recommend you take proper advice from someone experienced in this type of arrangement. My situation is almost opposite yours in that I am in UK in a house I don't own and have the income for life on another property I don't own ! Because the Will was badly worded, it is costing a fortune to establish a position everyone is (sort of) happy with. There is also a house in Spain which has brought further issues into the equation. And finally, Spain does not recognise Trusts. :thumbdown:
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Re: UK Will, Inheritance Tax, UK Trust.

Postby El Cid » Fri May 01, 2015 9:14 am

That sounds a bit complicated.

All I can say is that, in Spain, when a share in a property is left as a life interest (usufruct) then there is an IHT liability on that usufruct. The value of that usufruct depends on what % share that represented and the age of the usufruct holder.

For example, if the total bequest was worth 100k and you left your wife a life interest to 50%, then, if she was 60 at the time, the value of her usufruct would be 29% of 50k. For each year above 60 the % decreases by 1%.

I would stress that this is how the tax works in Spain and if she was tax resident in Spain I would assume that the same rules would apply to a UK property.

My advice would be to get some professional advice on this as the trust could be a complication.

Sid

Granite
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Re: UK Will, Inheritance Tax, UK Trust.

Postby Granite » Fri May 01, 2015 10:07 am

Thanks for those two replies which as I suspected highlight likely problems. My objective, on the basis that I died first, would be to retain the UK house until my wifes death such that she could return permanently to the UK if she so chose whilst avoiding Spanish IHT. The scenario must be quite a common one for expats in Spain. The simple route is to keep the current Will with the house going to my two children thus avoiding Spanish IHT and having a "word" with them as to what they should do with it. I trust them (excuse pun) but no doubt many may think that is a rather risky strategy!

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Re: UK Will, Inheritance Tax, UK Trust.

Postby infoseeker » Fri May 01, 2015 6:21 pm

Yes, it is risky
Your child could marry, divorce, die before you which will complicate matters. You may end up paying IHT inheriting from them!
I H T is the big bugbear in Spain, unless you have had the property 5 years and have generous regional allowances
I do not understand from your previous post how your wife would avoid IHT

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Re: UK Will, Inheritance Tax, UK Trust.

Postby Granite » Fri May 01, 2015 6:38 pm

Sorry if I did not make that clear. My children, UK tax resident will currently inherit the UK house and as the value is below the UK IHT threshold there will be no tax to pay. My proposed change was to still leave the house to my two children but in a UK Trust such that they would continue to let the property and pay the net rental income or a share of it to my surviving spouse. Her only benefit from the Trust would be the income.

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Re: UK Will, Inheritance Tax, UK Trust.

Postby Lavanda » Fri May 01, 2015 8:45 pm

Sell all the properties and take your wife ten times around the world. Let your children make their own fortunes. It's almost impossible to predict the future and cover all eventualities because governments change and move the goalposts and nice children, or nice spouses, can fall out ...

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Re: UK Will, Inheritance Tax, UK Trust.

Postby chrissiehope » Fri May 01, 2015 10:00 pm

Lavanda wrote:.. and nice children, .... can fall out ...


tell me about it .... :roll:
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Re: UK Will, Inheritance Tax, UK Trust.

Postby Lavanda » Sat May 02, 2015 8:11 am

I can never understand why men (and it's nearly always men) love their wives enough to want to provide for them but don't trust them enough to leave property directly to them, rather than children (presumably from other relationships) who are then tied to an agreement with their father's wife until she dies creating problems and resentments for everyone. Leave the property to the wife. Trust HER to do the 'right' thing.

I know how the argument goes ... but she might marry again and leave the property to her new husband and he will leave it to his children, etc. etc. What are we talking about? Chatsworth House or something?

Thank goodness my OH and I have sorted out properties only in my name and only in his. No join property. No problems for the future.

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Re: UK Will, Inheritance Tax, UK Trust.

Postby Granite » Sat May 02, 2015 10:29 am

You have introduced an irrelevant dimension to the discussion. When we lived in the UK my wife was left the house because despite my sex I trust my wife! When we moved to Spain the problem of Spanish IHT arose if my wife inherited the property. The house would have to be sold to pay the tax. So, and I suspect like many others, the house is now left to my kids who are tax resident in UK. I trust them to do the right thing because they are perfect.
The property is a two bed terrace but it is at the end of the terrace so a little bit posh. :)

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Re: UK Will, Inheritance Tax, UK Trust.

Postby Lavanda » Sat May 02, 2015 11:29 am

Many apologies, Granite. I have seen this thread and variations of this thread many, many times over the last ten years. It is natural that people want to avoid paying taxes, if legally possible. However, the complicated and convoluted ways people seek to do this can, very often, cause misery and distress to all the survivors and inheritors and beneficaries the original plans were designed to protect. What I wrote is not, in my opinion, irrelevant. It may be that in seeking to avoid tax you make your children liable for the repairs, upkeep and maintenance of a property they have no income or benefit from for many years to come. Of course, your wife may not mind going cap in hand to your children with upkeep bills and they may not mind paying out but ... they might. Trusts and tying people up together for untold years to come may work perfectly well ... but over the last ten years there have been sufficient posts to put this in doubt. I'll take my irrelevant observations and go away but wish you luck. Or rather I wish your wife and your children luck.

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Re: UK Will, Inheritance Tax, UK Trust.

Postby chrissiehope » Sat May 02, 2015 1:16 pm

Just for the record, in my case it went to his kids because it was his 'family money' :wave:
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Re: UK Will, Inheritance Tax, UK Trust.

Postby Lavanda » Sat May 02, 2015 8:39 pm

:shock:

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Re: UK Will, Inheritance Tax, UK Trust.

Postby chrissiehope » Sat May 02, 2015 10:17 pm

Don't look so shocked lavanda - I was (& still am) happy with the arrangement, the problems are really only because the Will was DIY and has caused lots of issues... :thumbdown:
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Re: UK Will, Inheritance Tax, UK Trust.

Postby Lavanda » Sun May 03, 2015 6:23 am

That's good. It was the implication that you were not 'family' that shocked me.

In my own case my OH has various children from various relationships but we all get on extremely well, thank goodness. I am only 20 years older than his eldest and come from a long-lived family. I have insisted that the children get their inheritance at the point at which my OH does the inevitable, should that event come before mine. It's simply not fair to make them wait until years and years, hopefully. I will have a strings-free house to live in that is mine and his children will have their inheritance and we can continue our excellent relationship. If I die first, ditto with my OH having a house to live in and my inheritors having their benefits straight away.

Of course, the governments of the future might just confiscate ALL personal property or something else we haven't thought about ... but the aim is simplicity and security for all.

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Re: UK Will, Inheritance Tax, UK Trust.

Postby katy » Sun May 03, 2015 8:59 am

Where there's a will there's a war. :(

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Re: UK Will, Inheritance Tax, UK Trust.

Postby GerryinCajiz » Sun May 03, 2015 11:06 pm

Where there is a will, there is a relative!
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