Rationalising recently deceased parents investments

2

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  • Rodders2409
    Rodders2409 Posts: 160 Forumite
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    Thanks Getmore4Less...but I'm going to need some handholding through you're last post:embarasse:embarasse

    What's DOV?....
    What's PET?...
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    If the ns&i "bonds" include index-linked savings certificates he should probably just get them re-registered in his own name. They are an excellent deal and irreplaceable.

    What would you two do with £100k between you? Would the £50k each let you clear debt, or buy property, or let you exploit use-it-or-lose-it investments e.g. pension contributions, or LISAs, or .....?

    Your father has the opportunity to keep the ISA money within ISAs if he wants to.
    Free the dunston one next time too.
  • Rodders2409
    Rodders2409 Posts: 160 Forumite
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    Yes, there's approx £23K of Index linked NS&I investments, so we should just transfer to Dad then.

    My guess is that we'd probably put it into pensions as we have 3 yrs of allowance to use up I think.

    Do you think Dad could keep the ISAs going in his name now?
  • xylophone
    xylophone Posts: 44,348 Forumite
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    Do you think Dad could keep the ISAs going in his name now?

    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/418147/Spousal_TIIN_final.pdf

    Example

    https://www.nationwide.co.uk/support/support-articles/manage-your-account/isa-inheritance/isa-inheritance-about
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    Rodders2409 wrote: »
    Do you think Dad could keep the ISAs going in his name now?

    As xylophone's links explain the method is indirect but that is the effect of it. The gist is that he withdraws the assets from your mother's ISAs and is allowed to open extra ISAs for himself that are big enough to accept that money over-and-above his normal ISA-subscribing activity.

    Naturally he might choose not to, for instance if he'd rather see the money contributed to pensions by each of you. Personally, in his shoes I'd be reluctant to give a lot of money away. What if one of you goes bankrupt, or had a messy divorce, or turns into a gambler, alcoholic, or druggie? Still, it's his money. He must do what he thinks best.
    Free the dunston one next time too.
  • Rodders2409
    Rodders2409 Posts: 160 Forumite
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    Gambling alcoholic....has someone been talking ? :smiley:
    I understand the point made, but generally occupy the other end of life's spectrum with too many active pursuits and not enough time !!

    If he can transfer easily into another ISA and the performance is good then that sounds like a plan.
    That said wouldn't there be be better returns with additional Pension contributions in terms of tax etc?
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    edited 2 February 2018 at 8:47PM
    Rodders2409 wrote: »
    That said wouldn't there be be better returns with additional Pension contributions in terms of tax etc?

    The big benefit of pensions would be if (i) contributions attracted further employer contributions, or (ii) contributions could be made by salary sacrifice, or (iii) the son concerned could thereby avoid higher rate income tax.

    If your father's income is secure (e.g. final salary pension and state retirement pension), and if he has a fear of future cuts to the tax-exempt amount for inheritance tax, and if he'd enjoy seeing the use you two made of such a gift, then he might not be taking too much risk in gifting money to you. It's his shout.

    By the way, there are several other things he could consider. (i) For instance if he's got the old-style SRP, and if he's not too old for the idea to be unattractive, he could consider suspending ("deferring" in the jargon) his SRP for a few years. That can be a wonderful investment. (ii) He could make a £3600 gross pension contribution every year, knowing that if he never draws from the pension the money can pass to you two (or your children ...) without its entering his estate and being potentially subject to inheritance tax. (iii) He can gift you £3k p.a. between you exempt from IHT (£6k in the first year, using unused exemption from the previous year). (iv) If he has surplus income he could make regular gifts out of income to you that would be free of IHT.

    At the moment fear of IHT might be groundless, but who knows what a Corbyn government (or some other) might do? For example I find the current treatment of the principal private residence bonkers in spite of the fact that my descendants might do well out of it.
    Free the dunston one next time too.
  • martinsurrey
    martinsurrey Posts: 3,368 Forumite
    Rodders2409 wrote: »
    Thanks Getmore4Less...but I'm going to need some handholding through you're last post:embarasse:embarasse

    What's DOV?....
    What's PET?...

    DOV is a Deed Of Variation - it a legal letter that amends the contents of a will for tax purposes, so you could make it so that the cash went straight from your mums estate to you, rather than passing through your father first.

    now that nil rate bands are transferable it is NOT a good idea to do this in your case.

    PET is a Potentially Exempt Transfer - If someone gifts someone else a capital sum of money (so money not from current earnings), that sum is a PET. If the person who gives the gift dies within 7 years of giving the gift, some of the value of the gift is added back to the value of the deceased's estate for inheritance tax purposes. The amount added back decreases over time ( from 100% in years 0-3 to 20% in years 6-7).

    IHT = inheritance tax

    in your fathers case, if he inherits your mothers entire estate, he can gift you as much as he wants, and also inherits your months entire £325k IHT allowance. If he dies within 7 years only a portion of the gift will be added back to his estate to calculate if any IHT is due, this is the most efficient simple way of using the inheritance tax system.
  • newatc
    newatc Posts: 845 Forumite
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    Sorry for your loss Rodders.

    As far as I can see there are no tax implications in your father giving his children gifts (effectively inheritance upfront) and there obviously benefits for you and your brother. He is the key person in this decision and if that makes him happy at this difficult time (and I can see why it would) then I would gently go along with the idea .
  • Keep_pedalling
    Keep_pedalling Posts: 16,591 Forumite
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    newatc wrote: »
    Sorry for your loss Rodders.

    As far as I can see there are no tax implications in your father giving his children gifts (effectively inheritance upfront) and there obviously benefits for you and your brother. He is the key person in this decision and if that makes him happy at this difficult time (and I can see why it would) then I would gently go along with the idea .

    I would agree, although please make sure he retains sufficient for his own needs, and does not leave himself in the position where he could not afford to replace a boiler or keep the house maintained in good condition.
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