Changing my will

[Trevor51]

A year ago I re-wrote my will following a divorce to exclude my ex wife and leave everything to my 2 children. The value of the house, ISAs and pension are currently over the inheritance tax threshold. I am currenty retired and only taking a small pension and none of the ISAs but I do intend to start drawing down more of the pension and start to cash in on the ISAs. I gather cashing in the ISAs is tax free but the pension will be subject to tax.
In my will all my assets go to my two grown up children from my first marriage. Nothing to my seconf ex wife who is a non UK resident and has her own house anyway. To avoid exceeding the IHT threshold I am thinking of transfering part of the house to me two children now. Does this seem a good idea or are there pitfalls to watch out for?

[PallasAthena]

Before doing anything get some professional advice from a specialist solicitor. It's a complex area, expensive if you get it wrong.

If you live for another 7 years it probably will work. But gifts given within 7 years of death are taxed for IHT (on a sliding scale). Although you are planning to give it as a gift HMRC will value it for IHT at market value at date of transfer.

That is assuming you do not continue to live in the house. If you gift it but retain the right to live there it probably won't achieve your objective of reducing the value of your estate and HMRC will treat it as still belonging to you. Search online for 'IHT gifts with reservation' for more information about that.

Also consider the possible implications if in the future you need your local council to pay your care home fees. They might consider your transfer a 'deprivation of assets'.

Are you confident your ex-wife could not make a claim on your estate?