Inheritance Tax Planning

oneilly

Hi, i'm a married man with own house in my name only, i also have 2 kids, i have life insurance for both myself and wife.

Should I put my life assuance in trust??

sabelu

Yes you should.

Robert_Sterling

oneilly wrote:

Hi, i'm a married man with own house in my name only, i also have 2 kids, i have life insurance for both myself and wife.

Not that it is any of my business but why is the house not in your wife's name as well as your own. Iether as Joint Tenants or as Tenants in Common
( JT or TIC ). Depending on the overall financial position sometimes JT is preferable and sometimes TIC is preferable.

leeegglestone

My parents estate is estimated at £400,000, included in this is a house approx value £80,000. does anyone know of a way of making a Will now so that when the last surviving parent dies, the house has already been willed away to the grandchildren thus reducing the estate for final inheritance tax payments by £80,000.

Is it legal to do this and say that after one parent dies the second remaining parent will live in the house rent free until their death when the children will then claim the house as theirs as originally willed to them when both parents were alive.

Will this legally reduce the estate and therefore avoid high interitance tax payments?

sneekymum

You'd have to know which parent was going to die first and then put the house in that parent's name.

Wouldn't it be easier to arrange to pass over some of the other assets and make use of the Nil Rate Band?

leeegglestone

Can you explain what a nil rate band is?

jules01

Who values the house for inheritance tax reasons?I,e a family house owned for 40years - In the event of the death of the owner who values it?What is used to calculate it?Do they send round a valuer?

Robert_Sterling

Each person has a nil rate band for Inheritance Tax ( IHT)
Currently the band is £275000

So everybody can leave the first £275,000 of their estate whoever they choose and they will pay no tax on that first £275,000

The nil rate band is due to go up to £300,000 in 2007 I think.

Wher a couple have an Estate of £400,000 at present they may well have more than that in due course due to house price inflation.

Leaving everything to one's partner then is probably not the right option.

If you are able to make useof the NIL Rate Band for both partners instead of only one nil rate band then you save £110,000.

Because the potential saving is so high it might be worth geting professional advice.

With regard to the house.

The law has a notion of a "Gift with reservation"

If the grandparents leave their house to the grandchildren after the second death but continue to live in the house until the second death then for inheritance tax purposes it is as if the girt has not been made.



So separating out the house just muddies the water from a tax point of view.

The solution to this problem is a particular form of trust.

I know what form but as this is not financial advice I am just pointing you in the right direction.

i.e.

Make use if you wish to of BOTH nil rate bands.


P.S.

As of today I think same sex partners who have registered their partnership in accordance with the law can leave all their estate to their partner EXEMPT of IHT as can married couples.

myfinanceproblems

My mother has an estate of approximately £320,000. As the present limit is I think £267,000, it leaves approx £63,000 to be taxed at 40% which is £25,200.
Would I be able to transfer £25,000 to my own savings account so that when that time arrises that I have to pay the tax on her estate, I will already have the funds available in my account to pay it. :xmassign:

sneekymum

Why not transfer £63,000 to your own savings - a gift from mother - which you can choose to give back anytime you like - then get mother to survive seven years and pay no tax at all....


....by your figures...

of course the Nil Rate Band is currently £275K and set to increase in increments over the next few years.