Inheritance Tax Planning

jdmchugh

I am a single male thinking about Inheritance Tax Planning and I have listed all my easily traceable assets which come to £260,000. I then listed all my bank accounts containing some £80,000 which I intend to blow by drinking /gambling/womanising OR by putting cash every so often into a special account for my favourite niece in Dublin. I would not be surprised if she then used this money to help buy a little place in France. Yes I trust her .I invite comments as to how this would not be feasible.\In my view opening a Trust is a nonsense as you are simply doubling your effort/expenses to ensure the relation gets the same as the taxman. Curious McQ

Robert_Sterling_3

My mother is widowed and in poor health, her estate would be valued at approx £320,000. Which will be split
20% of the total to grandchildren and 40% each to myself and my sister.
The IHT would be approx £23,000.

How much, if any, is tied up in here home.
or put another way how much is available to her in cash.?
How old is she?

Robert_Sterling_3

MCQ:
How old are you?
How old is your niece?
Do you have other Nieces and/or nephews?

jdmchugh

Pale Rider---I am 56 with increasing heart problems which make me think in terms of maybe another 10 years (father died 66). I have a good annual pension plus interest from savings.
My will takes care of everyone within the figure of £260,000 . my earlier proposal is simply to keep anything over that figure within the family which a used by all home in France would do. Regards McQ

Robert_Sterling_3

[N.B. I have inherited this reply duty from Pale Rider ]
You want to avoid Inheritance tax which as things a re at present might be about £30,000.
If you died tomorrow this tax would become payable.
Giving your niece the money to help her buy a place abroad would at first sight solve your problem if you then live for a further 7 years.  If there is "an understanding" that she would then be expected to let members of the family have use of the property then it might come within the "gift with reservation" category and still be counted as part of your estate.  If on the other hand you sent her a cheque with a letter saying "This is a straightforward gift do whatever you wish to do with this money" then it clearly would not be a gift with reservation.

Careful_Shopper_3

Any advice out there would be gratefully received.

I am asking on behalf of my mum and her sister. My grandad (their father) is a widower and has just moved into a rather nice nursing home. His flat is estimated at around £200k and is due to be sold. He has around £60k in the bank.

He would like to give his daughters (2 of them) about £30k each as a gift whilst he's still alive to see them enjoy it. He is 82 and in not too bad health since his move into the home. It has also been suggested by my mum that he should give a small token to his 3 living grandchildren and 3 great grandchildren. (me being one of the grandchildren and the proud owner of the 3 great grandchildren) I think the sum in mind was £3k each for grandchildren and £1 or £2k for the great grandchildren.

My mum has never worked but my aunt does and as such is very concerned of the tax implications in receiving gifts in excess of £3k. Both, to be honest, could do with a financial helping hand.

Both are also concerned as to implications involved should my grandfather's money he's left with be insufficient to pay for the nursing home should he live longer than he thinks he will. I thought we'd had our last Christmas with him last year buy hey the ole fella pulled himself up again.

The home is around £32k per annum so leaving himself with a bit less than £200k will see him short of the 7 years.

Many arguments between my mum and her sister have been fought and frankly I'm a bit sick of it all so a clearer picture to tell them both would be great, please ..... anyone.

Robert_Sterling_3

First there good news
There will be no inheritance tax eventually to pay as the first £263,000 at present is free of Inheritance Tax and this tends to goes up in line with inflation.

It costs about £32000 per year to be in the home so the £60,000 will last for a couple of years. As there is no inheritance tax consideration there is not a pressing need for your father to pass on money now.
It would clearly not be right for him to give everything away and rely on the state to look after him.
Where it is possible to do so I would always advocate that the family look after their parents in their old age. At first sight it looks as if your father could have paid his two daughters more than about a £1000 pounds each a month to look after him in his old age. The two daughters could use some of the money to "buy in" assistance with that task.

klondyke

It would clearly not be right for him to give everything away and rely on the state to look after him.

[edited cos brackets in wrong place :-[

If it appeared that money has been given away in order to avoid paying for care (or IHT, but that shouldn't be an issue here)  then it might be reclaimed.  

However, it would appear here that the gifts would not be primarily to avoid fees, so the main thing is to leave enough accessible to meet needs for the foreseeable future - ensuring this is invested for best income.

The rest can safely be given away (provided the figures are right and total is definitely under £263 or there may be some tax payable later)..... leaving the sensitive question as to what 'foreseeable' might be in this context.

Lord, I hope my kids won't feel they have to look after me in my old age, especially if I can afford a nice nursing home

Let him enjoy both his nursing home and seeing his family enjoy some extra cash, especially if they need it, rather than it being a greed trip.

Careful_Shopper_3

Many thanks for both of your replies. I told my mum of your advice and she decided that perhaps she should contact the bank and the tax department for further information.

She has now been informed that providing it is seen that adequate provision has been made to meet care costs (which £200k will do) my grandad is entitled to gift money to his family also, and in addition if he wishes
he can set up a direct debit to them to pay £3,000 per annum (backdated as far as 6 years) as a gift.

MarkyMarkD

[snipped]... my grandad is entitled to gift money to his family also, and in addition if he wishes he can set up a direct debit to them to pay £3,000 per annum (backdated as far as 6 years) as a gift.

I expect he'd set up a standing order actually if he's giving them money.