Case Study: UK expat with UK assets – what happens with IHT?



  • Jimmy is a 54 year old UK national, living anywhere in the world and single.
  • He owns a home in the UK worth £500,000.  He has no other UK assets.
  • He has a daughter (Jessica, 26) who he’d like to inherit the house.
  • If he dies, there’s going to be IHT to pay on his estate

(£500,000 – £325,000 x 40% = £70,000)

  • He is unlikely to have enough liquid assets to cover this, as he is funding a QROP and doesn’t want his daughter to have to sell the house to pay it either.
  • Jimmy takes out an Asset Protection Plan for £200,000
  • He appoints himself and Jessica as Trustees and Jessica is the only beneficiary.
  • 3 years later, Jimmy dies.
  • His worldwide assets at death were valued at £600,000
  • IHT liability at death = £110,000 (£600,000  – £325k x 40%)

Outcome

  •  Asset Protection Plan pays £200,000 to Jessica as surviving Trustee.
  • Jessica settles her father’s estate costs
  • Probate is obtained for the house
  • House is transferred to Jessica and she also retains the balance of the Asset Protection Plan to do with as she sees fit.