Part factual and part theorectical question regarding IHT and how to mitigate (naturally proper advice should be sought)
Assume:
Retired couple in early 60s with one child.
Joint ownership of property (house) say 250K. Other assetts (bank account/shares etc) are held principally in husbands name (assume 900k). There is also a limited company (wife and son directors), but husband is principal shareholder. The company holds assetts (share/property etc) to a value of say 270k
To date no consideration as to regard of taxation,IHT, or will etc has been made
Assuming death now, if I understand correctly the following will occur (intestacy)
Total assets=1.3 million (1/2 property already owned by wife)
125,000 to wife, plus interest from half remainder. half remainder would pass to child (only child over 18), and inherit the remainder when the remaining spouse dies. IHT would become due as over the 255k threshold, roughtly to the amount of 416k (* we come to this later, this does not assume that transfers between husband and wife are exempt? how does this apply to life interest etc)The assets held by the company, are not owned directly by the husband, but he is the shareholder? What effect would a death of the principal (total) shareholder have? I assume the company would be valued to determine the value of the shareholding and IHT payable on that (out of the other asset)? However I assume that the assetts of the company would remain with the company and not be taxed itself.
Now we assume that a will should be written, to the usual criteria the event of the husband dying, that the assets would pass to the surviving wife, and then on the death of the wife to the only child. This would avoid IHT as it is not payable between husband and wife. However is it possible that this may change? If so there would be the potential to incur IHT payment when the assetts pass to wife, and gain from the wife to child?
Whilst passing all assets to spouse may avoid IHT at the first death, I suspect that this is not efficient and upon the second death IHT will be payable on the combined assetts over 250K (i.e not taking advantage of two deaths, and therefore two IHT thresholds). I suspect that from a tax view it may be better to change this criteria to "assets to be left to survivors (wife & child), so that assets are transfered to both, partifculary as the level of assets are quite high to reduce the overall tax liability when both parents die.
Ideally, what would be the best taxation planning in these cirumstances to reduce overall tax liability?