Inheritance Tax Planning

sneekymum

Life Insurance - just put it in an envelope marked "to pay IHT with"-

dunstonh

sabelu wrote:

Is'nt there an insurance that protects against inheritance tax ?

see my answer to the first time you asked.

fagun

oceanblue wrote:

It would be virtually impossible for a house to be held for the benefit of minors in anything other than a trust.
Let's assume you and your wife/partner had died, and willed the family home to your children. Would you expect their guardians to reside with them at the family home? If not, why would you want to will it to them "in specie"?

If you really wanted them to continue living there, and their guardians were in agreement, there would be no income tax nor CGT on the way into the trust (and, probably, no IHT if you had embarked upon some estate planning via Nil Rate Band Discretionary trusts). There would be no significant tax considerations while your children lived in the "family home"; there is the possibility of a periodic charge being levied, but this would be miniscule. On disposal, the home would be treated as if it had been your children's pincipal private residence, so no CGT.

If my wife/I survive, then we would hold the bequeathed property in trust - but outside a discretionary trust. If we both died, we'ld expect the guardians to sell the property, because the kid(s) would move in with them.

How do Nil Rate Band Discretionary Trusts work? Can I write one myself, or do I need to use a lawyer?

sneekymum

It does make me wonder that if you've enough wealth to worry about IHT it might be better to get a will written by an expert - I would not attempt to write such a will - and I thought I knew plenty... :rolleyes:

fagun

sneekymum wrote:

It does make me wonder that if you've enough wealth to worry about IHT it might be better to get a will written by an expert - I would not attempt to write such a will - and I thought I knew plenty... :rolleyes:

I would if I thought I needed to - that's why I'm trying to do my homework. Our assets are really simple - house + savings + a few shares.
Our will is really simple. Everything upto the Nil Rate Band to the kid, rest to wife/me if we're both surviving; evething to kid if both of us die; Equal split to nephews/siblings otherwise.

The only thing I'm worried about is the treatment of the hosue. The house only becomes an issue is if one of us survives -as we'd then need to keep it. Otherwise, we'd expect the house to be sold by the executors.

oceanblue_3

fagun wrote:

I would if I thought I needed to - that's why I'm trying to do my homework. Our assets are really simple - house + savings + a few shares.
Our will is really simple. Everything upto the Nil Rate Band to the kid, rest to wife/me if we're both surviving; evething to kid if both of us die; Equal split to nephews/siblings otherwise.

The only thing I'm worried about is the treatment of the hosue. The house only becomes an issue is if one of us survives -as we'd then need to keep it. Otherwise, we'd expect the house to be sold by the executors.

What you need to think about is this: do you and your wife own your house as joint tenants? If you do, then you might like to consider re-registering your ownership with the Land Registry so that you become tenants in common. This means that you would each, effectively, own half of the house; when the first one of you dies, his or her 50% would be directed by the will to a Nil Rate Band Discretionary Trust, thus facilitating the use of BOTH Nil Rate Bands.

Nevertheless, I think sneekymum is probably right: this sort of planning becomes necessary only when the total value of all of your and your wife's assets approaches £500,000.00.

It might be a good idea to contact a will writer/estate planner to discuss your needs and aspirations; try this website http://www.willwriters.com/
I reckon you need to think about the following:

make wills


make provision for the creation of Enduring Powers of Attorney

sever the joint tenancy, and re-register as tenants in common
(a will-writer would help with these three)

make sure that any life insurance is written in trust (contact your adviser or the life company)

if you have death in service benefits at work, ensure the trustees have a nomination of beneficiaries statement from you (contact your HR department).

fagun

oceanblue wrote:

make wills

Done - but need to make sure they're OK. Saying that, who decides if they're not valid? We're not expecting anyone in the family to contest them. Will HMRC challenge in order to get more money?

oceanblue wrote:

make provision for the creation of Enduring Powers of Attorney

Not done - why/what/who???

oceanblue wrote:

sever the joint tenancy, and re-register as tenants in common

We've both signed a joint "Disapply Rule of Survivorship" notice and keep this with our will. I didn't know I had to register this as well?

oceanblue wrote:

make sure that any life insurance is written in trust (contact your adviser or the life company)

Done (well sort of, its been on my list of things to do)

oceanblue wrote:

if you have death in service benefits at work, ensure the trustees have a nomination of beneficiaries statement from you (contact your HR department).

Done

So I'm sort off there

PS. This is quite a good list - maybe should have a seperate postie on Wills and IHT.

Nick_C_4

Is'nt there an insurance that protects against inheritance tax ?

You may be getting confused with life insurance taken out to cover inheritance tax after someone's made a gift while still alive. If you gift something while alive, but then die within seven years, inheritance tax is still due, although the level owed changes each year you live, until after seven years it's zero. To cover this, I think you can take out (or used to be able to) life insurance that steps down the cover each year in line with the IHT liability. Since this is a form of decreasing term assurance, it's not particularly expensive. I'm not sure if this is still allowed though?

Whole of life to cover IHT can't be efficient, surely?

Robert_Sterling_3

Nick_C wrote:

If you gift something while alive, but then die within seven years, inheritance tax is still due, although the level owed changes each year you live, until after seven years it's zero.

I may be wrong but ....

.... I do not think the level changes each year
I think it is only reduced after 3, 4, 5 , 6 and 7 years have passed.

whiteflag_3

Nick_C wrote:

You may be getting confused with life insurance taken out to cover inheritance tax after someone's made a gift while still alive. If you gift something while alive, but then die within seven years, inheritance tax is still due, although the level owed changes each year you live, until after seven years it's zero. To cover this, I think you can take out (or used to be able to) life insurance that steps down the cover each year in line with the IHT liability. Since this is a form of decreasing term assurance, it's not particularly expensive. I'm not sure if this is still allowed though?

QUOTE]

Its still around and usually "gift inter vivos" cover