As one of Britain’s leading entertainers and television personalities, Bruce Forsyth was loved by millions.
The star was well rewarded for his talents too. The host of Strictly Come Dancing, The Generation Game and Play Your Cards Right reportedly left behind £17m in assets when he died in 2017.
But did Bruce make the right moves when it comes to estate planning?
Leaving everything to his wife, Bruce made use of the spousal exemption
He was reportedly keen to avoid a large chunk of his estate being swallowed up by inheritance tax, according to an article by Mail Online:
“The move is believed to have been designed to thwart the taxman. Money passed from husband to wife is not subject to inheritance tax. Sir Bruce himself once described the levy as ‘a bit over the top’. He added: ‘I think your inheritance should go to your children more than back to the country you’ve lived in.’”
Bruce had six children – a son and five daughters – and nine grandchildren from his three marriages. But rather than leaving anything to his children, his left £11.5m to his widow, Lady Wilnelia Merced, in his will. In 2019, she wound up his business – reportedly worth a further £4.5m.
On the face of it, it seems like a smart move. If he had left money to his children, 40% of the amount exceeding the inheritance tax threshold would go to HRMC. The threshold is £325,000 for a single person.
In contrast, there’s an exemption if your estate is passed to a spouse or civil partner. So, Bruce’s widow would have paid no inheritance tax.
Some newspapers reported that she will distribute his assets over time to Bruce’s children. Such gifts – called Potentially Exempt Transfers (PETs) – will fall out of the estate for inheritance tax purposes if she lives for at least seven years.
A risky approach
We don’t know anything more about Bruce Forsyth’s estate and he may have taken other measures that were not reported by the media.
But on the face of it, it’s a risky approach. If a widow passed away before the seven years were up, the amount of the PET would be added to the value of the estate.
Then there’s the possibility of a widow (or widower) not getting on with, or falling out with, children from previous marriages.
And then there’s a third scenario. If a widow or widower married again, their previous will would be rendered null and void. A new will might be made, cutting out children from previous relationships.
There’s more information about Potentially Exempt Transfers (PETs) on the Money Advice Service website. It says:
“A Potentially Exempt Transfer (PET) enables an individual to make gifts of unlimited value which will become exempt from Inheritance Tax (IHT) if the individual survives for a period of seven years.
If you don’t survive the gift by seven years, the PET becomes a Chargeable Consideration. It is then added to the value of your estate for IHT. If the combined value is more than the IHT threshold, IHT may be due.
Any lifetime transfer that is “Potentially Exempt” must meet certain conditions subject to certain exceptions. The transfer is a gift made by an individual to another individual or to a specified trust. This means, for example, the gift cannot be made from or to a corporation or company.”
If you want to guarantee that your children inherit after your death, a trust – rather than a will – is the best way of making it happen.