Help! I want to leave my house to my grandson and keep it in the family, but he can’t afford the inheritance tax: HEATHER ROGERS replies

I would like to leave my house to my grandson, but in his current financial condition, he will not be able to pay inheritance tax.

I don’t want the house to be sold in the long run since he has children, but I don’t see any other way.

My house is currently valued between £825,000 and £1 million. Do you have any suggestions on how to keep the house in the family?

SCROLL DOWN TO LEARN HOW TO ASK HESTER IS YOURS TAX QUESTION

Heather Rogers says: One of the most common problems that can arise when someone dies is that they have a lot of assets but very little money.

If the value of the estate, even after the application of the deceased person’s personal compensation plus any transfers of assistance from the deceased spouse (see box below), still leaves an inheritance tax liability, then that account should be funded outside of the estate.

This can cause a financial headache for the person dealing with the estate, as it means that money must be found to pay an inheritance tax bill before a will is issued and the deceased person’s assets are released.

But there are solutions to this problem both for you now and for a possible personal representative of your estate, who is usually an executor and / or a person who applies for a will.

These are explained below, along with what else you might want to consider before deciding how you want to transfer your property, which you are obviously attached to.

How to find money to pay inheritance tax upfront?

Personal representatives can personally pay inheritance tax in the form of a loan on property and claim its return after the sale of assets.

They can also apply for a loan to pay for it using the assets of the deceased’s estate as collateral. Anyone doing this should first get professional advice, including on interest rates.

Individuals can also take out an insurance policy during their lifetime to cover the costs of paying inheritance tax if they believe that their property will be due.

You should seek the help of a financial advisor on how best to do this, as well as the cost and availability of premiums. Your age at the time will be a factor.

When do you have to pay inheritance tax?

It must be paid at the end of the sixth month after the person’s death. However, it is possible to pay inheritance tax in installments if the inheritance consists of:

– Property

– Unlisted shares/securities

– Listed shares and securities

– Business interests.

In this case, the inheritance tax must be paid in 10 annual installments, with the first due at the end of the sixth month after the death of the deceased.

Interest is charged not on the first installment, but on subsequent payments. Interest is charged on the total amount of unpaid tax, as well as on any payments not paid on time.

In addition, if you sell an asset that allows you to pay inheritance tax in installments (for example, a house or shares), then you must pay the entire balance of tax.

Note that it may be more difficult to get permission to make a will in these circumstances, so talk to a lawyer first.

Inheritance tax can also be paid in installments if it can be shown that paying the lump sum is causing financial hardship.

What happens if you donate your home during your lifetime?

There will be capital gains tax on the transfer, and inheritance tax may still be due if you continue to benefit from the property.

This is called a “retained benefit gift” which nullifies the gift, meaning it remains in your estate for inheritance tax purposes.

What else should you consider before leaving assets to your grandson?

Passing on assets to grandchildren is a good inheritance tax planning measure because it removes those assets from their parents’ estate.

Adult children may already have assets of their own that, if inherited, may result in inheritance tax being assessed on their property.

By leaving your home to your grandson, he will be able to claim the £175,000 inheritance tax exemption as he is one of your direct descendants, in addition to the ‘zero band’ exemption…