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    • kittie
    • By kittie 15th Jul 16, 7:04 AM
    • 10,096 Posts
    • 49,018 Thanks
    kittie
    I have 3 grown up children, all in their 40s and with mortgages and finding life hard, as is usual at that age. I am widowed and age 68. I have savings, a good sipp, which I manage myself and have done since 2006. It is increasing in value via share trading. I haven`t drawn from my sipp in a year and it was my husbands, transferred to me, tax free. My children are my sipp beneficiaries. My health is very good. I have my own mortgage-free home and was widowed 17 months ago

    I have more than enough income and want to transfer some money to the children. Can I transfer, via standing order, £250 pm to each of the children, as small gifts, to continue as long as I am comfortable with that amount leaving? I would rather do that than withdraw cash lump sums for them from my sipp as I am aware of the possibility of funding care later in life

    I also have a fixed rate savings bond maturing in august. It was my husbands and is now worth £57k. Can I also give each child £15k, as well as the £250 pm? I would still have enough savings to allow a good safety net. I am aware of the 7 year rule
    • xylophone
    • By xylophone 15th Jul 16, 9:16 AM
    • 19,214 Posts
    • 10,925 Thanks
    xylophone
    You are in good health, have a mortgage free property and substantial savings and income. You are also relatively young.

    In such circumstances, it seems to me that there is little concern over "deprivation of capital" and making gifts with a view to reducing any IHT due on your estate very reasonable.

    With regard to regular gifts out of income, see

    http://www.pruadviser.co.uk/content/knowledge/oracle_archive/oracle-technical/oracle-tech-january-15/normal-expenditure-out-of-income-expenditure-new/

    https://www.gov.uk/inheritance-tax/gifts

    It seems to me that in your circumstances, you could also make the gift from capital that you propose.

    With regard to IHT in general, you have a personal allowance, any unused spouse allowance and the potential of the upcoming family home allowance.

    http://www.rossmartin.co.uk/private-client-a-estate-planning/inheritance-tax-probate/666-iht-transferable-nil-rate-band-records

    https://www.gov.uk/government/publications/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band

    Presumably you have an up to date will - if you need additional advice in respect of estate planning your solicitor should advise.
    • kittie
    • By kittie 15th Jul 16, 10:44 AM
    • 10,096 Posts
    • 49,018 Thanks
    kittie
    That is a great comprehensive list xylophone and much appreciated. I have a will in place and have handled all home finances for a very long time including transfer of company pension, vesting etc and then did probate myself. I did forget about the upcoming home allowance though!

    Very many thanks

    Just an edit to say that if I pop my clogs before I am 75, then my beneficiaries will inherit my sipp tax free, so it makes sense to wait and not remove capital as I buy and sell within the sipp and it is consistently growing. If they get into a struggle situation then I can and will remove some capital from the sipp to help them but at the moment it is a goose with golden eggs
    Last edited by kittie; 15-07-2016 at 10:49 AM.
    • kizzaplough
    • By kizzaplough 21st Jul 16, 7:26 AM
    • 4 Posts
    • 0 Thanks
    kizzaplough
    inheritance
    hi all

    my father has change his will to the following

    he has 5 children and is intending to leave each child a property value of approx £200000 ( he has 8 property's ) and a joint property between all 5 value approx £500000.

    my question is this, the tax fresh hold is £325000 then inheritance tax is 40% on the £1,175000
    left. will we all have to pay our own share of this ie £80000 and jointly on the £500000 house by re mortgaging it to raise the £200000 then renting it out to pay this off. also would the £325000 fresh hold come in tax relief for each person ie £65000 each and how long do we have to pay the inheritance tax?
    • xylophone
    • By xylophone 21st Jul 16, 9:08 AM
    • 19,214 Posts
    • 10,925 Thanks
    xylophone
    Has your father's will been drafted by a solicitor?

    If so, has the solicitor not advised him concerning the Inheritance Tax that is likely to be due on his estate?

    https://www.gov.uk/inheritance-tax/overview

    http://www.ashfords.co.uk/passing-on-the-family-home-the-new-inheritance-tax-allowance/

    https://www.gov.uk/paying-inheritance-tax/yearly-instalments

    If your father has not already taken advice concerning IHT, it would be as well if he did so?
    • Mojisola
    • By Mojisola 21st Jul 16, 11:19 AM
    • 25,972 Posts
    • 66,694 Thanks
    Mojisola
    my father has change his will to the following

    he has 5 children and is intending to leave each child a property value of approx £200000 ( he has 8 property's ) and a joint property between all 5 value approx £500000.
    Originally posted by kizzaplough
    It can be risky leaving individual properties in this way.

    Your father will have to change his will if he ever sells a property or one child could be left without his/her individual share.

    If one or more of the properties rises or falls in price, some of the siblings could feel very hard done by.
    • Keep pedalling
    • By Keep pedalling 21st Jul 16, 5:10 PM
    • 2,171 Posts
    • 2,297 Thanks
    Keep pedalling
    Your father really should drop this idea of trying to force all his children into maintaining his property portpholio beyond the grave. If he really wants to help you he should be looking at ways of reducing the IHT bill that is going to met by the estate.
    • SeniorSam
    • By SeniorSam 25th Jul 16, 7:52 AM
    • 1,102 Posts
    • 546 Thanks
    SeniorSam
    It does seem to be a poorly constructed Will. However, any inheritance tax due would have to be paid when due by the executors of the estate. They may be able to negotiate a deferrment of up to 10 years by agreement with the Revenue, but with all the properties, it is likely that HMRC would insist that the tax is paid before any distribution of the estate.

    Even with several properties and some may have to be sold to pay taxes does not change the fact that the estate is to be distributed between the five children, so whatever is left, then the executors can split up the estate, possibly agreeing to pass on properties to individuals if they wish, but at the valuation price. The executors are the ones that will be responsible.

    Sam

    A new Will would make lif easier.
    I'm a retired IFA who specilised for many years in Inheritance Tax, Wills and Trusts. I cannot offer advice now, so my comments are just meant to be helpful.
    • Keep pedalling
    • By Keep pedalling 25th Jul 16, 8:59 AM
    • 2,171 Posts
    • 2,297 Thanks
    Keep pedalling
    hi all

    my father has change his will to the following

    he has 5 children and is intending to leave each child a property value of approx £200000 ( he has 8 property's ) and a joint property between all 5 value approx £500000.

    my question is this, the tax fresh hold is £325000 then inheritance tax is 40% on the £1,175000
    left. will we all have to pay our own share of this ie £80000 and jointly on the £500000 house by re mortgaging it to raise the £200000 then renting it out to pay this off. also would the £325000 fresh hold come in tax relief for each person ie £65000 each and how long do we have to pay the inheritance tax?
    Originally posted by kizzaplough
    Your sums only include 6 properties, what about the other 2? Unless they are being left to charity there will be IHT to pay on those as well.

    I really feel sorry for the executor, unless he has appointed professionals, which case they will be on a nice little earner with the complexity of sorting it all out.
    • HarryHill
    • By HarryHill 10th Oct 16, 2:24 PM
    • 2 Posts
    • 0 Thanks
    HarryHill
    Do we have to pay IHT?
    My mother recently passed away and there is under £2000 in her bank account and no other assets. Before she died she gave each of her 5 children £5000. Does this now have to be declared for IHT through the Executor?
    • Somerton
    • By Somerton 24th Oct 16, 8:33 AM
    • 4 Posts
    • 0 Thanks
    Somerton
    Nowhere in the article is Business Property Relief mentioned (BPR) After 2 year of owning assets invested in these they do not attract Inheritance tax, but what I would like to know is do they affect the new main Residence relief. I have read that unlike Trusts, gifts, reliefs and exemptions they are added back into any calculation of the new main residence nil rate band. Is there a tax expert out there who can enlighten me?
    Somerton
    • SeniorSam
    • By SeniorSam 31st Oct 16, 7:31 AM
    • 1,102 Posts
    • 546 Thanks
    SeniorSam
    Banks ?
    Do not go to any Bank or Building Society for Inheritance Tax planning. They are only interested in how much they can obtain in fees and ongoing charges. A good STEP Solicitor should be able to arrange all you need, but do compare quotes from different solicitors. A married couple each have an inheritancr tax free allowance of £325,000, so a married couple would need to have an estate of over £650,000 before any IHT would be payable. NEVER accept the first quotation you obtain for advice, there is often lower costs elsewhere.
    Sam
    Last edited by SeniorSam; 21-11-2016 at 7:28 AM.
    I'm a retired IFA who specilised for many years in Inheritance Tax, Wills and Trusts. I cannot offer advice now, so my comments are just meant to be helpful.
    • heleen
    • By heleen 15th Nov 16, 5:31 PM
    • 115 Posts
    • 14 Thanks
    heleen
    Nothing to declare for assets under threshold, Harry
    Your mother had no estate other than £2000 and gave relatively small amounts of money to teh kids. The combined amount falls under the IHT threshold so you're fine.
    I love it when a plan comes together
    • HugoFS
    • By HugoFS 29th Nov 16, 8:47 AM
    • 2 Posts
    • 0 Thanks
    HugoFS
    Family Home - Direct Descendants
    My mother made out a will some years ago in which she left here entire estate, including the family home, in equal parts to her four children. After my brother died, she made out a new will to the effect that the quarter share my brother would have had should be divided into two thirds for his only son and one third to his widow.

    My mother suffers from dementia and is not now capable of changing her will. The family home is estimated to be worth around £1.25M. The rest of the estate is around £200K but running down quickly because of care costs. As my parents were married until my father died some years ago, and he left all his property to my mother, I understand she gets twice the single person's allowances for IHT.

    Thus, the new IHT Family Home provision is obviously attractive with her estate as it stands today. However, as my sister-in-law, not a direct descendant obviously, is due one twelfth of the estate, will the Family Home Allowance be available? Is it an all-or-nothing thing?

    If it is, what possible alternatives are there? For instance, can those concerned agree to change the will (after my mother's death) to the effect that my sister-in-law gets paid a twelfth of the value of the total estate but only from funds not arising from the house itself? I believe this mechanism is called a Deed of Variation. Is this likely to be accepted by Probate (and HMRC, if they have a say)?

    Any thoughts gratefully accepted.
    • Keep pedalling
    • By Keep pedalling 29th Nov 16, 9:33 AM
    • 2,171 Posts
    • 2,297 Thanks
    Keep pedalling
    That is a good question. As the value of the house is way over the maximum private residence relief that will be available then your SILs bequest should not effect the nil rate band that applies at the time of your mother's death, as the vast majority of it is still being passed on to direct descendants.

    This might change if her estate is reduced greatly by care costs, but if that happens IHT is probably not going to be much of an issue.

    At the time you may need to take legal advice on the matter, and a DoV might be needed but that can only be done with your SILs agreement.
    • HugoFS
    • By HugoFS 30th Nov 16, 9:53 AM
    • 2 Posts
    • 0 Thanks
    HugoFS
    Thanks, Keep pedalling

    I see what you're saying, but my big concern is that the estate will have to pay tax on the part of the property value that would be exempt if the Family Home Allowance applied, because my sister-in-law is not a direct descendant. This would be £200K from next year, rising to £350K in 2020, all other things being equal, so a tax saving of £80K to £140K over time. If it's an all-or-nothing allowance, I need to take steps now to avoid losing a large sum in tax in future. You say "vast majority of it is still being passed on to direct descendants" but I can't see anywhere in the advice I've read where it says any such thing. Maybe it's a matter of interpretation, but the text I can see says:

    " a residential property, which has been their residence at some point and is included in their estate, is left to one or more direct descendants on death"

    which doesn't help me much, as it isn't clear whether the legatees all must be direct descendants, or only some of them. I've tried looking in the various Finance Acts covering IHT but none of them seemed to help. Is there something I'm missing?
    • RatherConfused
    • By RatherConfused 30th Nov 16, 1:16 PM
    • 7 Posts
    • 0 Thanks
    RatherConfused
    Going round in circles !!! Literally for a year now as different advisors suggest different solutions !

    Heres the summary ;-

    2 parents age 84
    Main residence 1.4m (no mortgage)
    8 flats 1m (no mortgage)

    2 children
    IHT Liablity today assesed at 780,000

    Aim ; reduce inheritance tax

    Background : lawyer has suggested 2 options

    1. take mortgage of house for 500k and invest in aim shares
    2. sell 2 flats raise 400k and mitigate iht

    ps parents dont qualify for life insurance


    question ?

    1. whats the best solutions to mitigate IHT ?
    2. i have around 500k cash and live offshore with offshore company. is it possible to use the cash to create a lien against some of the property to reduce iht ie by way of issuing a mortgage or other ?

    thanks in advance
    • Keep pedalling
    • By Keep pedalling 30th Nov 16, 1:59 PM
    • 2,171 Posts
    • 2,297 Thanks
    Keep pedalling
    I think they have left it rather late for IHT planning. I would not encourage them to start investing in high risk AIM shares. Apart from the risk associated with the shares, they still need to survive 2 years for that solution to be effective, and a IHT rule change could put those shares back in to IHT teritory at the stoke of the chancellor's pen.

    Selling or giving you and your sibling some of their property could work if they survived 7 years , but they will almost certainly be hit with a rather large CGT bill on disposal so that risks a double tax hit if they don't survive 7 years.

    The one way they could avoid their estates paying any IHT is to give everything above the nil rate band to charity.
    • RatherConfused
    • By RatherConfused 1st Dec 16, 2:10 PM
    • 7 Posts
    • 0 Thanks
    RatherConfused
    thanks !

    what about these 2 options ?

    1. gifting the 1.4m house ?

    dont you get an immediate 60pc relief on IHT going up to 100pc over 7 years ?

    the 7 year rule ?

    2. can they mortgage the flats to create a lien ? any benefit there ?

    3. can i use 500k i have in cash to mitigate IHT ?
    • Keep pedalling
    • By Keep pedalling 1st Dec 16, 4:14 PM
    • 2,171 Posts
    • 2,297 Thanks
    Keep pedalling
    thanks !

    what about these 2 options ?

    1. gifting the 1.4m house ?

    dont you get an immediate 60pc relief on IHT going up to 100pc over 7 years ?

    the 7 year rule ?

    2. can they mortgage the flats to create a lien ? any benefit there ?

    3. can i use 500k i have in cash to mitigate IHT ?
    Originally posted by RatherConfused
    You do get taper relief when gifting over the nil rate band, but it does not kick in until 3 years have passed, and the reduction is 20% it does not hit 60% until 5 years have past.

    If they gift you the house, they would either have to move out, or pay you full market rent otherwise it would never fall out of their estate and you could face the CGT hit as well when you came to sell.

    I can't see how the other 2 options would work, but look on the bright side you will still inherit a substantial amount of money, and if either of you parents ever need care support they are in a position to pay for the best available 40% of which will offset by reduced IHT.
    Last edited by Keep pedalling; 01-12-2016 at 4:19 PM.
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