Inheritance Tax: Save £100,000s with simple advanced planning Article Discussion

Mojisola · 20 May 2017 at 9:27PM

Mojo71 wrote: »

When the time comes, can Person B instruct the solicitor that Person A's estate go straight to Person C, thereby saving an unnecessary 40% tax hit by not adding it to their own sizeable assets?

Yes. ......................

tonywick · 27 May 2017 at 3:58PM

I can't find an exact answer to this one, but apologies if it's addressed somewhere:

Our marital home is worth about £500K, I personally have savings/investments of about £130K and my wife about £70K. So upon our deaths our total assets look like they'd be largely under the cutoff for IHT for our two children, especially if we keep nibbling away at it..

However, if I give my daughter £20K from my savings for a house deposit, and I die a few years later (within seven years), would there be a liability for the gift, given that I assume I'm deemed to own £250K of the house and with my savings my personal "worth" would be £380K on death (or £360K allowing for the gift)? Obviously hypothetical, given that I might have spent another £50K before I die, but I'm just trying to play it safe.

Any advice appreciated.

bowlhead99 · 27 May 2017 at 6:44PM

Well, you're right that you would have £250k of house and £110k of savings and investments and £20k gifted in the 7 years which makes £380k of assets assuming your expenditure is exactly equal to your savings and investments growth from now 'til then.

However, the estate that's in scope of inheritance tax is the stuff that gets inherited by someone other than your spouse (spouse to spouse gifts, or transfer on death, is exempt). So if your £250k house value or some of your pile of savings and investments isn't going to your kids but to your wife, then your total value that's being inherited for inheritance tax purposes is less than £380k.

ah1668 · 27 June 2017 at 8:58PM

I live in the South East and my current house (mortgage free) is worth more than £325,000 (as are most houses around here) plus I have savings which I use the income from to boost my pension and from which I would pay for Care at home if/when it becomes necessary. I cannot afford to give away my savings. I have previously given monies to a trust, which then lent the same amount to each of 3 nieces as a house deposit.
I’m about to move house to be nearer my 3 nieces, not much change in the value of the property.
Can I give my nieces a share of the future house, say 10% each, so we own it as tenants in common, and pay them a proportional rent (to avoid ‘gift with reservation’)?
As each niece is married with children, and I am long time divorced, I understand there is a risk to their share if a divorce happens.
Is this a valid strategy, and what can I do to protect against their divorce, or other falling out?

Keep_pedalling · 27 June 2017 at 10:21PM

I would not complicate their lives with a small share of your new house. If you give them rent they will be taxed on it. It seems you do have surplus income, otherwise you would not be able to afford to pay the proposed rent, do why not just gift them that money on a regular basis? Those gifts would come straight out of your estate, and there is no income tax attached to those gifts.

There is little you can do about their relationships, you just have to trust them not to fowl up.

lesleymarr · 29 June 2017 at 12:46PM

I bought a house in N8, in 1996. Since then property prices have risen. My home is now worth a million quid, a/c Zoopla. Purchases by ‘shell companies’ have contributed significantly to the rise in house prices. Shell companies are set up in tax havens. They can be used by people who wish to hide their identity, in order to avoid paying tax, and to launder money from criminal activities. When solicitors ask house buyers to show where their money comes from, they can only ask honest people, not criminals, because the criminals hide their identity. So, the government has allowed the price of a home in London to rise, due partly at least to the money from criminals, which is of NO benefit to me at all. I don’t want to sell my home. I like living in N8.
https://www.theguardian.com/money/2016/may/26/revealed-9-rise-in-london-properties-owned-by-offshore-firms
Recently my mum died, and I began to think about my own mortality, and how this will affect my child who shares my home. I am shocked to discover that because I have some savings (and a GOOD JOB TOO because my pension has not arrived on my 60th birthday, which is when I was expecting it) that my child will have a mighty IHT bill to pay, and may have to sell her home to pay it. So, she will lose her mother, and lose her home.
A friend of my daughter’s lived in N8 with her mum. Her mum died, but because she lives in a council flat, the daughter can continue to live there and won’t lose her home.
My brother lives in a very nice house, larger than mine, but worth less than mine because it’s in Telford. One of his sons lives with him. Because house prices are much lower there, the value of the house +his savings does not pass the IHT threshold. So his son won’t have to lose his home to pay IHT.
This situation seems to me horribly unfair. I can’t see what I can do to squirrel away enough money for my daughter to pay the IHT, because any way I think of is apparently illegal, and I don’t want to give her my house now because if she then gets wed and makes a bad choice, the property is hers and will be included in the divorce settlement.
I know IHT is an unpopular tax.
Would it be possible for NSI Bank to create a new account, for IHT payments? Then people like me could pay in enough money to cover at least some of the IHT, legally. The government would still get their IHT (pound of flesh) but my child could keep her home.

lesleymarr · 29 June 2017 at 12:51PM

I own some lock-up garages. Is it a good idea to put them in trust so they are exempt from IHT? I rent them out, they provide me with a pension so I'd need to continue receiving the rent.

Mojisola · 29 June 2017 at 12:52PM

lesleymarr wrote: »

I bought a house in N8, in 1996.

Since then property prices have risen. My home is now worth a million quid

Purchases by ‘shell companies’ have contributed significantly to the rise in house prices.

You are fortunate in that your house has increased in value quite dramatically. That's not down to anything you've done. Why shouldn't your estate pay some tax on your windfall?

Your brother could be thinking "My sister's so lucky - her house isn't as big as mine but it's worth £1m."

You could sell up now, buy something out of London and still have enough left to give your daughter enough money to buy her own property.

lesleymarr · 29 June 2017 at 1:08PM

I have employed some stinkers. A friend of mine (a trainee solicitor) commented on my really bad luck with solicitors. I replied, why would I go out of my way to employ bad solicitors?. We agreed that a personal recomendation from friends or neighbours was of little value since most people only employ one solicitor and can only comment on that one, it's not like they are comparing shops or any item they have a lot of experience of. The website 'solicitors from hell' has been taken down because the owner was threatened with legal action. Tripadvisor isn't taken down because lots of people dislike a particular hotel.
For example, when I buy a garage, if the seller and I do our own conveyancing it costs me £40 to change the Land Register and whatever we pay for an ID1 (maybe £5? each) and takes 2 weeks. Last garage I bought using a solictor, it took nearly 6 months. The solicitor wrote the wrong address for me on the title deed. I complained, and got a refund. :rotfl::T:mad:

lesleymarr · 29 June 2017 at 1:31PM

Mojisola wrote: »

You are fortunate in that your house has increased in value quite dramatically. That's not down to anything you've done. Why shouldn't your estate pay some tax on your windfall?

Your brother could be thinking "My sister's so lucky - her house isn't as big as mine but it's worth £1m."

You could sell up now, buy something out of London and still have enough left to give your daughter enough money to buy her own property.

As I explained, my daughter will have to sell the house to pay IHT. If I sell up and move out, she will pay IHT on the gift I give her to buy somewhere else. As I can give her £3000 a year I will have to live for 260 more years to give her a million free of IHT. We are not that long-lived in my family.

Inheritance Tax: Save £100,000s with simple advanced planning Article Discussion

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