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Dear Adam,

I am writing to you with regards to my Mother and the potential inheritance tax bill I believe we may end up with. My Mother is 87 years old, in good health but getting on a bit and we are considering a care home. She owns her 2 bed flat in Richmond worth around £900,000, plus she has around £150,000 worth of stocks & shares ISAs and another £100,000 worth of shares. She receives her state pension and another pension which was left by my Father, who died many years ago. Ideally we would like to keep her property. What is my tax bill likely to be and what can I do about it?

Regards, Marilyn, TW10

Dear Marilyn,

Thanks for getting in touch. You are not alone in this issue, HMRC claimed nearly £3.5 billion in 2013/24 in inheritance tax. Based on those figures you sent me, if your Mother was to pass away today, the inheritance tax due would be £200,000 – a fairly substantial amount. So what can you do? There are a number of ideas:

  • ISAs will lose their tax-free protection on death and will fall into her estate. However, there are ways of switching these ISAs across into AIM stocks or other specialist investments which could become exempt of inheritance tax.
  • The direct share holdings will form part of her estate. We could look at switching these funds into assets that would qualify for Business Property Relief (BPR). Once switched over the clock starts ticking and your Mother would need to live for 2 years before the investment became exempt of inheritance tax.
  • There is also the option of moving some of her assets into trust and starting the 7 year clock running. There are multiple different trusts to choose from and each has different rules so consultation would be required.

The above are just a sample of the many different ideas we could look at, potentially saving making savings on an enormous tax bill. If you would like to ask questions or speak to one of our trusted advisers, please give us a call on 0208 819 8950 or email adam@sterlingandlaw.com


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