Large gift to pay off mortgage

[witz3nd]

Recently, an elderly aunt passed away, who owned a half share in her house along with her brother. (He did not live in this property as he has a house of his own). Her share has been willed to him, and he wants to give my wife and I this money in order to pay off our rather substantial mortgage. Can we accept this and pay it to our mortgage company, or are there tax implications.? Can we accept it as a "gift" out of his eventual estate for inheritance purposes? What other options do we have to minimise the tax?

[anniebird]

If you are given this money it will be classed as a 'Potentially Exempt Transfer'. After seven years it will no longer be included in your uncle's estate for inheritance tax purposes. There is a sliding scale if he does not survive for the full seven years. Another option is a 'Deed Of Arrangement' whereby the beneficiaries of your aunt's will agree to change the terms to allow you to inherit some or all of the value of the half share. This has the advantage that, should your uncle die within seven years, any inheritance tax has already been paid and no more will be due. There is a time limit on these arrangements so I suggest you talk to a solicitor ASAP.

[tufty7]

Why don't you look at taking out a offset mortgage with the one account or something similar , for example if your mortgage on your property is �100,000 and he was to "park" his �80,000 money in your account , that would mean you are being charged mortgage fees on �20,000, What the tax man don't know about the tax man can't grieve about ,........ that way he still has access to his money and you lower your monthly outgoings and when it comes to pass and he expires, well thats another story for another day ........

[witz3nd]

anniebird,
many thanks for your reply. This certainly seems the best option available.As you suggested we are arranging to see a solicitor .

Tufty7 thanks also. We already have an offset mortgage, but our Uncle wants to do things "by the book" and eliminate any stings in the tail in future years.