How much of Bruce Forsyth’s national treasure will go to IHT?
Sir Bruce Forsyth was a genuine broadcasting legend, with a career spanning over 75 of his 89 years of life, and ending appropriately enough on the November 2015 Children in Need special of Strictly Come Dancing, a show he had co-hosted since its 2004 revival.
His death on August 18th 2017 brings the curtain down on a lifelong love affair with light entertainment, with Brucie turning his hand to everything from tap-dancing and singing to stand-up comedy and a hugely successful stint as a game show host.
Catchphrases including “didn’t they do well?”, “good game, good game!” and “nice to see you, to see you nice!” crossed the genres too, and were more a part of the man than of the shows they originally came from – as was his trademark silhouette pose at the start of each show.
All of this added up to Brucie – as he was known by millions – being regarded as a true national treasure, and the star’s own millions included a good amount of earnings from the national public broadcaster, the BBC.
So with his recent death, how much of that money will be returning to the public purse in the form of inheritance tax? Reports put his estate at around £17 million, he has two ex-wives, his widow Wilnelia Merced, six children, nine grandchildren and three great-grandchildren – so how much IHT did Bruce Forsyth pay?
Play Your Cards Right
The key to the answer lies in who Bruce Forsyth left his money to in his will, and according to reports, the entire £17 million passes directly to his widow, Wilnelia, with zero IHT to pay.
Lady Forsyth-Johnson, to use her official title, is about 30 years younger than Bruce, and was born and raised in Puerto Rico before she met her future husband in the UK in 1980, when he was a judge and she was a contestant in that year’s Miss World contest.
They married three years later and were inseparable ever since, with Wilnelia making television appearances in recent months to talk about her husband’s health.
So it’s little surprise that Bruce has left his entire fortune to her – aged 59 now, she potentially still has a long time to live, which is also significant when it comes to the star’s children and grandchildren.
Of course if Wilnelia were to die and leave the £17 million estate to their children in its current form, then the first £650,000 would be exempt from IHT – her own £325,000 exemption and an equal exemption passed over to her as the surviving spouse – but the remainder would be charged at 40%, or at 36% if more than one tenth of it were given to charity.
But with hopefully decades ahead of her, careful estate planning now could still help to make sure that as much as possible of Brucie’s legacy passes on to his children and grandchildren, if Wilnelia plays her cards right.
The Price is Right
Get it right and you can pass substantial sums on to the younger generations without having to pay huge amounts of inheritance tax on it.
When you make a ‘potentially exempt transfer’, commonly referred to simply as a ‘gift’, it only becomes subject to the full amount of IHT if you die within three years, and only if it is over £250 to any one person in one year.
After three years, the amount of IHT payable on large gifts falls by 20% each year until, after the seventh year, there is no inheritance tax to pay.
Other exemptions apply to charitable donations, and wedding gifts up to £1,000 given to anyone, up to £2,500 to your grandchildren, or up to £5,000 to your children, are all exempt too – so make sure the price is right if buying a high-value wedding present.
If you don’t want to start handing over your descendants’ inheritance while you are still alive, careful estate planning can still minimise the IHT bill when you die, using structures like trusts to protect the value of assets against the usual tax grab.
The Generation Game
The decision to leave his entire estate to Wilnelia – and so avoid paying any inheritance tax – raises an interesting point, as if she were to remarry someone younger than her, they could potentially inherit HER estate IHT-free on her death.
Of course we are not suggesting that she should do that, or even that the media reports about the Forsyth estate are accurate, but in principle there is nothing in law to stop widows from remarrying and qualifying for a whole new 100% spousal IHT exemption.
With an age gap of 20-30 years each time, it’s entirely plausible that a substantial estate could pass down through the generations completely untaxed, by virtue of marriage each time; with the recent introduction of same-sex marriages, it would not even have to ‘flip’ genders each time.
Again, it is unlikely that anybody would go to the lengths of exploiting this as a legal loophole, but it is an interesting point with the average age at marriage steadily increasing in recent years, and significant age gaps no longer a controversial subject.
Didn’t They Do Well?
It’s hard to begrudge Brucie for leaving his entire estate IHT-free to his wife – it’s a perfectly common thing for a married couple to do, and he had worked well into the usual retirement years, reportedly without claiming the state pension.
But how does the £17 million figure compare with other recent celebrity estates to make the headlines? Following a few years of high-profile deaths, one thing to note is the sheer variety of valuations placed on celebrities’ estates.
Sir Terry Wogan, for instance, reportedly left ‘just’ £1 million to his family, despite working until ill health forced him into retirement – ironically the first commitment he missed hosting was the same 2015 Children in Need appeal where Brucie made HIS last appearance as Strictly host.
Wogan famously put much of his earnings into forestry in Scotland, and over the years woodlands have been exempt from capital gains tax, income tax and – crucially – inheritance tax, making them a tempting proposition for anyone looking to protect their estate in their twilight years.
In contrast the singer David Bowie, whose will was filed in New York after his death, left roughly $100 million to his wife and two children, with seven-figure sums to old professional acquaintances and family friends.
Some of the UK’s most treasured stars reportedly went even further, taking steps in later life to reduce the IHT their beneficiaries would have to pay – Ronnie Corbett sold his home, a £1.3 million London property, back in 2003 but lived to the age of 85, dying in March 2016.
At the other end of the scale, not all celebs have their affairs in order as their family might have hoped. The comedian Rik Mayall died in June 2014 aged just 56, suddenly at home, and without leaving a will – meaning that his family had to pay the full IHT bill on his £1.2 million estate.
Nice to See You…
Whatever size of estate you are expecting to leave, we would be happy to talk through your options when it comes to estate planning and writing a will with EHL Solicitors.
Exemptions like leaving your entire estate to your spouse might seem like an easy solution to IHT, but it’s important to plan for all eventualities, including if the younger partner dies first or if you both die together or in quick succession.
It’s not always an easy subject to think about, let alone talk about, but it’s absolutely crucial to get your estate planned out both for IHT purposes and just to make sure that the right assets and sums of money go to the right beneficiaries.
This gives you peace of mind for the remainder of your life, and can also make things much easier for your family, who will know exactly what your wishes are, and what the IHT exposure is on your estate, at an emotionally challenging time for them.
Sadly some celebrity deaths serve as a salient reminder that not everybody lives well into their retirement years, and those who die sooner than expected don’t always have a period of illness to get their affairs in order.
It really is never too soon to write a will, especially if you have substantial assets, such as a house or a self-owned business, or potentially vulnerable dependants like young children.
By writing a will, you prepare your estate for your death – but more importantly, you help to protect the people you care about, as the final act you can make to keep them safe and comfortable for the years ahead.
To find out more about how RCG can help you plan your will, or about our IHT tax advice, contact us today to arrange a free 30-minute consultation with a member of our team.