guaranteed way to avoid inheritance tax

isofa

beingjdc wrote: »

Faced with receiving the amount of money it takes the average person thirty years to earn, in return for doing absolutely nothing apart from suffer a sad but ultimately inevitable loss, I wouldn't carp about not getting the full thirty five years' (ie a working lifetime, pretty much) worth.

Why should the money I get for doing no work be taxed less than the money I get for doing work?

Perhaps because it's already been fully taxed under the donors lifetime?

They have paid income tax and all sorts of other taxes all throughout their lifetime, so when they die and leave it to their families / beneficiaries, how can it possibly be fair that this money is then taxed again. It is truly an appalling and unfair tax.

I'll personally never be affected as I don't have any wealthy relatives, but it's the absolute principle of it I cannot stand.

katybshopaholic

Thanks for all your comments. L&G rejected our complaint as "the investment was in line with your agreed risk profile and suited your objectives", yet the Reasons Why Letter confirms our risk profiles were minimal and our attitudes cautious. It stated "we were prepared to put a portion of our lump sum into a higher risk fund than cautious providing our overall portfolio risk does not increase above cautious". However 50% of our cash went into the L&G Property Fund, which we were told at the meeting was low risk, yet even at that time it was moderate to high risk. 5% went into L&G Artemis European Growth Fund and 5% Invesco perpetual income fund, both moderate to high risk. So in all our portfolio was 60% moderate to high, 40% cautious. How can this possibly reflect our investment attitude? By the way, this has really changed my attitude to thrift and outlook on living for today, not saving for tomorrow. I'm still hoping for an outcome from the ombudsman but no idea how long that may take.

dunstonh

However 50% of our cash went into the L&G Property Fund, which we were told at the meeting was low risk, yet even at that time it was moderate to high risk.

Generally considered to be low/medium. Mainly due to only having 1 negative calender year in the last 15 years or so.

The others are medium/high.

A proper portfolio should utilise areas from above and below your risk profile but average out to match your risk profile. That fund spread would come out at medium. If the suitability report clearly shows cautious then the funds are above that and I would be confident in pushing that to the FOS if I was you.

Most tied agents are not allowed to portfolio plan as they dont have the remit or the training. Sometimes they give it a go by using a few funds to give the impression you are diversifying but your spread is awful. That in itself is not something you can complain about but risk certainly is. The lack of fixed interest funds is the strange thing. These should have been used to drag the risk of the portfolio down. It probably wouldnt have stopped a loss occuring as they have come off a bad period too but it would have kept the portfolio in line with your risk profile (and the drop would have been less).

The only possible snag to your complaint is if your cash holdings were included in the risk profile. If you hold a lot in cash deposits and these are included as an overall risk profile then they would drag the risk profile of the recommendation right down. e.g. your 60% medium high and 40% low/medium become much lower because as they only represent x% of your overall holdings including cash whereas you are not including cash.

evenasus

Tighthead wrote: »

Put it another way, why should your parent's estate be hit with a 40% tax bill when they have worked 30 years to build it up?

Exactly!

We paid off our sons mortgages earlier this year. Why wait till we're dead and then let the tax man get his grubby hands on it?

Our sons have just got to make sure we stay alive for the next seven years.

To keep within the Inheritance Tax threshould, you can give regular cash to whoever you want too.

beingjdc

Tighthead wrote: »

I applaud your attitude, but IHT is usually more emotive for the donor/settlor than the beneficiary. Put it another way, why should your parent's estate be hit with a 40% tax bill when they have worked 30 years to build it up?

Because it's not theirs any more, they'd be gone. The person being taxed is the person getting wealth they have not earned. This argument about "already been taxed" is based on ignorance about the velocity of money. I pay tax on my wages, but I still have to pay VAT when I go shopping. If I employ a cleaner (I don't, but say I did) they have to pay tax on what I pay them, even though I am paying out of my post-tax wages.

If there were no tax apart from income tax it would have to be about 40% on every penny of earnings, whereas for the average person it is more like 20% at the moment. A balance of taxes is far better - and far fairer for those people who work hard all their lives but weren't born into rich families, and therefore already face the disadvantages of being likely to go to worse schools, be less likely to be able to afford university, and not have family contacts who will help them find good jobs, without the obscenity of the rich kids from the other side of town picking up a lifetime's wages tax-free to boot.

Secondly, most inheritances are overwhelmingly made up of property, which people haven't actually "worked hard to build up", but have overwhelmingly accumulated thanks to the work of inflation. I have said before I would be more than happy to exempt the purchase price of any property willed, or cash derived from its sale, from inheritance tax - but I imagine the £650k property you need to be leaving to qualify for inheritance tax was most commonly bought in the early 70s for around £75k.

beingjdc

evenasus wrote: »

Exactly!

We paid off our sons mortgages earlier this year. Why wait till we're dead and then let the tax man get his grubby hands on it?

Our sons have just got to make sure we stay alive for the next seven years.

I hope your sons own a hospital, for when the taxman closes your local one because selfish people like them aren't prepared to pay their fair share.

katybshopaholic

Thanks, L&Gs document marks the property fund as "moderate" but we were told our investment would be in blue chip corporate property which was low risk. The financial advisor had an answer for everything. Yes we took a monthly income of 5% but when I voiced concern over depleting our investment he said the money funds made would more than cover this while our capital in a building society was stagnant and in real terms losing money because of inflation. His actual words were "if we (L&G) couldn't beat high street interest rates we wouldn't be in business". I feel really strongly that financial reviews should be recorded - rather like police intereviews - to stop people making glib assurances. He also promised regular reviews and constant monitoring of funds so if there was any concern about performance we would be contacted with flexibility to move funds around. Once our cheque was cashed and bonuses banked we heard nothing more. When I met with his successor he visibly winced when he looked over our portfolio and said it was not what he would have recommended for cautious investors. He did suggest moving funds into other areas but we were so disillusioned we decided to cut our losses.

dunstonh

L&Gs document marks the property fund as "moderate" but we were told our investment would be in blue chip corporate property which was low risk.

IFAs work on their own risk scales using independent research as providers own risk scales dont always start from the same base point. The L&G rep though has to use L&G's scale.

I feel really strongly that financial reviews should be recorded

General rule of thumb is to get it on paper. If its not on paper then ignore it. Any refusal to put it on paper will tell you more about the advice then everything said by that individual. Pre-sale suitability reports are becoming more popular on the IFA side. Tied agents are unlikely to adopt it though.

He also promised regular reviews and constant monitoring of funds so if there was any concern about performance we would be contacted with flexibility to move funds around.

From a tied agent? Highly unlikely. Its not what they are paid to do.

Part of the problem is that you saw a sales rep. You are going to get sold to. Currently sales reps are able to use the adviser tag but the FSA have proposed that they will not be able to (under retail distribution review) and will have to present their "recommendation" as a sales recommendation. Not an advice recommendation. That reflects what really happens.

He did suggest moving funds into other areas but we were so disillusioned we decided to cut our losses.

You didnt need to do that. They had cash funds and far lower risk funds available which would have allowed you to avoid the surrender costs.

I still think you have a strong case with the FOS. Look at your suitability report and the risk profile wording. Use the words in the risk profile used by them and compare them to the funds used. You say low/cautious was shown as your risk profile. Yet none of the funds using L&Gs own documenation refers to them as low or cautious. Use their words against them.

isofa

beingjdc wrote: »

Because it's not theirs any more, they'd be gone. The person being taxed is the person getting wealth they have not earned. This argument about "already been taxed" is based on ignorance about the velocity of money. I pay tax on my wages, but I still have to pay VAT when I go shopping. If I employ a cleaner (I don't, but say I did) they have to pay tax on what I pay them, even though I am paying out of my post-tax wages.

Based on ignorance, what a novel idea! :rolleyes:

Yours is a non argument. Anyone who doesn't pay inheritance tax, still pays all these taxes when they spend their inherited money, they pay VAT on products and services, the people they pay it to pay income tax, if they save it, they'll pay tax on the savings.

beingjdc wrote: »

If there were no tax apart from income tax it would have to be about 40% on every penny of earnings, whereas for the average person it is more like 20% at the moment. A balance of taxes is far better - and far fairer for those people who work hard all their lives but weren't born into rich families, and therefore already face the disadvantages of being likely to go to worse schools, be less likely to be able to afford university, and not have family contacts who will help them find good jobs, without the obscenity of the rich kids from the other side of town picking up a lifetime's wages tax-free to boot.

A balance of taxes may be fairer, but inheritance tax is a total oddity, even labour have doubled the threshold, hopefully the latter governments will wipe it out all together.

A high proportion of middle England will get clobbered by inheritances tax if they don't sort out their affairs early. This has nothing to do with a rich vs poor argument at all.

I know many people who are well over the limit who don't live a plush lifestyle, don't have city contacts, who parents and children work just as hard as the next to provide for their families.

If you think by passing money and wealth down to generations somehow makes a distinction between rich and poor, I'd completely disagree. If house prices and inflation carry on at their current rate in 20 years time, very few children leaving their parents will ever be able to afford to get on the housing ladder at all.

If you want to start accusing the rich and tax dodgers, you are barking up the wrong tree, what about the hundreds of residents that are non-domiciles skipping all sorts of taxes, or companies such as Tesco or Barclays that operating offshore divisions costing the treasury billions of tax revenue a year. Billions. Well covered in investigative journals. They are regularly fined, but still do this, because it saves them a fortune.

beingjdc wrote: »

Secondly, most inheritances are overwhelmingly made up of property, which people haven't actually "worked hard to build up", but have overwhelmingly accumulated thanks to the work of inflation. I have said before I would be more than happy to exempt the purchase price of any property willed, or cash derived from its sale, from inheritance tax - but I imagine the £650k property you need to be leaving to qualify for inheritance tax was most commonly bought in the early 70s for around £75k.

And similarly in the early 70s that inherited money could have then been used to buy houses of similar value. Just like today a 650K value will buy a similar value property. It's all relative.

I see my taxes being poured away by governments on crazy projects and bailing out failing banks - what an absolute waste. But I know when I pass it down to my families, they won't be so careless.

evenasus

beingjdc wrote: »

I hope your sons own a hospital, for when the taxman closes your local one because selfish people like them aren't prepared to pay their fair share.

Just for your information, my sons did not want us to pay off their mortgages and tried to talk us out of it. But once I make my mind up, there's no stopping me.

Several years ago one of my sons sustained horrific injuries to his leg, the surgeon, after four operations in six days, told him he must have done something very good in life. The surgeon held his finger and thumb .5 cm apart, saying he came that close to loosing it!
The accident, which was not his fault, was at his new employers, where he was still on a six month trial.
He was told he could not claim any benefit as his wife earned 10K a year.
So we had to help out then, as he was off work for six months.

The compensation he was awarded (which wasn't a lot) could have been much more than he was awarded. But, when asked by the solicitors if the scar across his back, where muscle had been removed to repair some of his leg and the now horrendously disfigured leg would affect him. As in wearing shorts, going swimming etc. He replied, not really.
When I found this out, I wanted to shout Doh! But he is as honest as the day is long.

So please do not say that my sons are selfish.

Sorry to have gone on a bit.:rolleyes: