Inheritance Tax Planning

System

How about discretionary trusts to avoid IHT

lisyloo

No, I can't think of anything but I would love to know then anser.

I suspect a catch such as illiquid e.g. property or undesirable return e.g. premium bonds.

Please tell.

MaryC

Posted by: john ivens Posted on: Today at 10:42am
There is a totally legitimate way of avoiding all IHT in the UK. It does not involve Trusts, offshore manoeuvres, giving money away,etc etc. It requires you to invest any amount you choose, in your own name,with total control. The only stipulation is that you have held the investment for at least 2 years. After 2 years, the entire investment is free of all IHT, no matter how your will is left. The investment is always available to liquidate, but should you choose to do this and re-invest in a similar available scheme, then the 2 year qualifying period starts again.
Does anybody have the answer?


Are you talking about business property relief??

MaryC

my aunt has died and left about 150.000 in cash as she was receiving income from two trusts in her life time I am told the estate is liable to share the IHT and her share is about 20.000 - does this seem right when the level for IHT is much higher

Ellenmed,

If you are the life tenant of a life interest trust (ie you are entitled to the income of the trust during your lifetime) then the value of the trust is included in your estate for IHT, even if you have had no say in where the trust fund goes to after you die.
The trustees have to pay the tax on this bit.

Sounds like this is the case with your aunt.

MaryC

I am a chartered tax advisor working for one of the big accountancy firms so I will try to answer questions if possible.

However, it does generally pay to obtain prefessional advice on this as it is a complicated area. If you try to DIY, you could end up out of pocket, having not acheived your objectives. At the very least if you pay someone to do it for you, then as long as they have professional indemnity insurance, you have got something to fall back on if the advice is dodgy.

TO find someone suitable, I'd suggest contacting the Chartered Institue of Tax and asking for details of an IHT specialist in your area. You should then be able to contact them to get an idea of costs before you go ahead. Some solicitors also specialise in this area, probably the Law Society could refer you to someone locally.

Generally speaking, the nil rate band discretionary trust route is something we commonly advise as it is so flexible in the future. It is also possible to set up trusts now with a nominal sum in them and leavve the money in your estate to go into them. This is common where one spouse has already died and the remaining spouse has, for example, 3 children. They could set up a discretionary trust for each child ( on diufferent dates)and their offspring, (either alive or not yet born) with £10 in each and direct either the nil rate or the whole estate to these. THis is done in advance as if the trusts were created on the same day (ie on the death), the the future IHT charges for the trusts would be greater under the horribly complicated calculations which are needed.

Hope this is helpful

System

IHT avoidance from John Ivens:

I have heard of a similar method, but it is linked to the proceeds from the sale of a business.

System

I am trying to persuade my mother to release about £30,000 in the form of a mortgage on her £500,000 house for me to buy a property with. She is 78 yrs old.I have two sisters and she is worried that she could lose her house if i defaulted. I obviously would not and she could take out an equity release if this happened.and i would then have nothing when she died. I am sure this would be better than paying inheritance tax later.....How can i persuade her!!!!!

lisyloo

I obviously would not

How do you know this?

Do you have insurance against every eventuality for the entire term of the mortgage?
e.g. you are in an accident and can never work again.

You cannot say you won't default unless you have every single eventuality insured e.g. death, divorce, redundancy, sickness, accident etc.

I am not even sure whether it is possible to insure to this extent e.g. redundancy protection normally only covers you for 12 months. What happens then?

System

Hello again everyone.

Paul Varjak - I am loving your name! But not your tax advice I'm afraid!!

This type of advice really is too specialist for anyone to be able to give on a forum like this. I would strongly strongly recommend that anyone interested in tax planning does not take every 'skinny' piece of advice at face value, but seeks proper advice instead: after all if you instruct a solicitor or accountant and they mess up you have redress: you have none against random faceless people here.

If you don't have a specialist solicitor/accountant then either get recommendations from other people, or check with a body called STEP (Society of Trust and Estate Pracititoners) - these are both solicitors and accountants who specialise in this field. There are plenty the length and breadth of the UK (in fact it is worldwide) and they have a website at https://www.step.org

I declare an interest - I am a STEP member, but if you feel wary of my advice why not try the Motley Fools Wills and Probate board?

HTH

brodev

silly question :P. In my will can I say" I leave my nil-band inheritance tax rate(or words to that effect) to my wife." or do I have to specify amount? TIA