IHT & Investment issues

cheerfulcat

In fact, it wasn't clear to me whether the investment was part of the MILs inheritance, or whether it was OP's own money; I thought the latter as it happens, and that the IHT question was separate. Perhaps you could clarify, Aussie_Bird?

dunstonh

You don't draw the 5% income out of the HYP, it is paid separately in the form of dividends.As I said:

And the investment bond would have any income from funds reinvested into them or reflected in the price of the units. In both cases, you are drawing what you are making one way or another.

Seems to me it's hard to advise about IHT on the investments without knowing a lot more detail about the other assets.

I agree. However, discussing investment options which may not be appropriate could create confusion. I have been assuming the investment was related to IHT planning, you haven't. CC is now just as confused.

exil

"Her estate is now substantial, but having struggled to make ends meet as a child, and not being aware of the financial security until her husbands death she is reluctant to disperse assets."

I may be out of order here, but it appears to me that pressure is being put on yr mother to gift her assets to you, rather than (as is her right) making use of them herself. She may want to go on a world cruise every year, and why not!

I'm all for parents being able to pass on assets if that is their wish, but it doesn't sound like it's entirely spontaneous in this case.

Assuming that I've actually got this wrong and your mother DOES want to do this,
how about paying for life insurance to pay the IHT?

margaretclare

I agree with exil. And as an 'older woman', can I just say that this kind of inference makes me very very angry.

MIL struggled to make ends meet as a child. So did many of us (or our parents/families did). I myself grew up in dire poverty but haven't done too badly for myself via education and career. I infer that MIL has inherited this 'financial security' because the OP says she 'wasn't aware of it until her husband's death'. I can't really comprehend this kind of thinking, but then, probably I'm just too darned independent.

exil says: "I may be out of order here, but it appears to me that pressure is being put on yr mother to gift her assets to you, rather than (as is her right) making use of them herself. She may want to go on a world cruise every year, and why not! I'm all for parents being able to pass on assets if that is their wish, but it doesn't sound like it's entirely spontaneous in this case."

Yes - just so. 'Disperse assets'? What does that mean?? If she has enough to live on comfortably, then why not enjoy life a little? Why should she worry about IHT - she won't be here, will she?

Thank God that I'll never have the sort of money where I have to worry about IHT! I'll never be rich, but what I have I earned for myself and didn't inherit from anyone, and I'm light-years away from being poor. The happiest state to be in!

Aunty Margaret

Dora_the_Explorer_5

I'm in complete agreement with exil and margaretclare on this.

She has now started to "gift" money to her children. In the anticipation that she survives longer than 7 years.

Anticipate all you like, but the sensible thing to do would be to carry out a thorough risk assessment.

EdInvestor

Aussie_Bird wrote:

Some of the money is generating an income which she is obviously reluctant to lose. A sum of money has been moved into Trusts to be distributed between her children after her death etc.

I trust Aussie Bird will pay attention to my suggestions as to the future generation of income accompanies by the likely increase in value of the capital, since plenty of IHT avoidance activity seems already to have taken place.

exil

"Her estate is now substantial, but having struggled to make ends meet as a child, and not being aware of the financial security until her husbands death she is reluctant to disperse assets."

This sounds to me like pressure is being put on her to transfer assets which are actually hers to do with as she sees fit. What if she wants to go on world cruise every year? Or leave the money to the local dogs' home?

dunstonh

We dont know if discounted gift trusts or loan trusts were discussed. These still allow an "income" to be paid whilst the capital is pulled out of the estate. There are limitations on these but if you are of the limitations and they are not applicable to you then they can be a great way to reduce IHT liability whilst maintaining control of the assets (to make sure they are not spent by the beneficiaries).

margaretclare

I'm a bit puzzled by what's meant by the OP's comment: 'not being aware of the financial security until her husband's death....'

How can this be?

Leaving aside the 'struggling to make ends meet as a child' what has happened throughout her adult life, since her marriage to the now-deceased father-in-law? Has she been 'struggling' all that time, or not?

I completely agree with exil. Whether an inheritance from her husband came as a complete and utter surprise, or not, it is HERS to do with as she pleases. If this inheritance is so huge that IHT is a concern, then why worry about investments which will grow, thus attracting more tax?

I'm really puzzled by all this. Also, DYOR springs to mind - mother should do her own research and make her own decisions.

Aunty Margaret

Dora_the_Explorer_5

It's not clear what age the lady is, but here's the caveat: one person in twenty over the age of 65 and one person in five over the age of 80 will have some degree of dementia.

she is reluctant to disperse assets.

If she has the capacity to decide what to do with what's hers then she has the right to everyone's respect when making wrong decisions as well as right ones. If she doesn't have the capacity to make decisions it's a completely different ball game.