Inheritance Tax Planning

Himpy77

First time poster here, so sorry if this has been covered before.

My mother has sold her house and is registered blind.

She wants to give me 30k leaving herself 25k and thus only being 4k over the amount limit before she can claim housing benefit.

Providing (and hoping she does) live past the 7 years what if any tax will I incur and if something happened to her before this time what would I have to pay?

I would stick it in savings bonds for her on the understanding it is there for at least the 7 years

sarah65_2

Hi there,
I am wondering if anyone would be able to help me with this question;
My grandmother recently passed away and transferred her estate to my grandfather (which was more than £325,000) therefore I know that this allows his limit to go to £650,000...However when the time comes unfortunately for him then the money shall all pass to my mother, which is approx £500,000. Does this mean that my mother will have to pay IHT then on the 500k or does she avoid it because she will be in the 650k limit, I am so confused as to wether my mothers limit would drop back down to 325k or would remain at 650k???
Please Help!!!
Thank you in advance

jennifernil

IHT is paid out of the estate, not by the recipient, and does not affect their IHT allowance.

Your grandfather now has the £650k allowance, so if his estate is under that there will be nothing to pay.

Your mother has her own £325k allowance, or if your father is dead and all his estate passed to your mother, she now has the £650k allowance.

Inheriting money does not alter this.

Transfers between spouses are generally IHT free no matter the amount.


http://www.hmrc.gov.uk/inheritancetax/intro/basics.htm

John_Pierpoint

.............but if the estate is over the basic nil rate band the full scale IHT400 return (It is as bit like a Self Assessment income tax return: a pack of multicoloured forms) has to be submitted; on this the proportion (100% in your case) of the second nil rate band has to be claimed.

Make sure you have all the paperwork for the previous deaths still available to avoid "misunderstandings".

gallygirl

Our financial affairs are v complex, including property in joint ownership, tenants-in-common and sole name but which we regard as jointly owned. We are not married and not planning on doing so. OH is well over property threshold and, once we put 2 properties into joint ownership, so will I.

We want to make wills but we need inheritance taxc planning first to make sure we hold property in the best way to start with.

How do I go about finding someone? I have found a list of IFA's in my area, some are well known co's, others less so. I can check out they are legit co's - but is there a specific qualification I need to look to look for? None of the qualifications listed seem really appropriate.

Thanks.

John_Pierpoint

This is the area where STEPS solicitors and IFA's (and "will writers" and some tax accountants) slag off each other's skills and charges.
In your position I would try to see if you can get a free or low cost meeting with three such organisations and ask them for their general proposals. Then come back somewhere like this and publish the results highlighting the differences.

Firstly I would buy something like "The Which? guide to Giving and Inheriting" so that you can talk the talk and almost walk the walk when you go to see these people. You can evaluate their real expertise, against their desire to collect a fee/earn a commission.
Unfortunately the 2005 issue is somewhat out of date as GB promptly changed the rules for "trusts" - if you don't understand the legal concept of "trust" you are not really ready to talk to anyone - the "Discounted Gift Trust" will crop up.
A new copy of this book was due for issue next month BUT Amazon no longer knows about it - perhaps the rumour publicised by The Telegraph (?), that the "Condems" desperate for more money, are going to have a second go at milking trusts? The funny thing is that Amazon now displays the front of a book. It shows two elephants intertwining trunks which is not on the front of the 2005 edition.

I think you need to get up to speed, or perhaps get married like a retirement couple I know, because giving a share of something to someone who is not your legal partner, could give rise to a double whammy:
Capital Gains Tax (probably 28% of the gain since purchase on the value given away) then if there is a death within 7 years a charge to IHT if up to 40% of the value of the asset owned by the deceased (not ameliorated by a transferable nil rate band currently 325K).

The problem is that only one of you will ever know if you have done the right thing - or live to regret the whole exercise.

Your "starter for ten": What is the rate of income tax payable by trusts?

Good luck

Perhaps we can compare notes;)

Update:

Google has now found this
http://www.amazon.co.uk/Giving-Inheriting-Which-Essential-Guides/dp/1844901181

I think there must have been an interim update to the 2005 version in 2007 showing a family of people on the
cover and covering the changes to trust taxation BUT not the introduction of the transferable nil rate band.

gallygirl

John_Pierpoint wrote: »

Your "starter for ten": What is the rate of income tax payable by trusts?

50%, up from 40% in 2010. You see, I do know some things......








well. google does .

Thank you so much for your detailed answer, lots of pointers there. Don't think marriage is an option - OH always been dead against it and unless we could take vows that said 'we promise to look after all our joint assets & give the tax man as little as possible' I don't think I could do it either .

Funny you mentioned the Which book as I saw it in the library & thought it would be out of date. I will preorder the new version.

Because OH would only be giving me 50% of property then we would be unlikely to hit CGT threshold due to fall in house prices. Once I've had some advice we'll probably try to get 1 transferred over in the 10/11 tax year.

Happy to compare notes once I have notes to compare

Wiganwishes

With an eye on IHT issues, if my husband and I were to pay the invoice for our granddaughter's school fees (in a lump sum covering several years) would this be classed as a gift to our daughter and son-in-law, (as they effectively benefit from it by not having to pay the bill themselves) bringing with it the 7 year survival issues?

Any thoughts appreciated.

kidmugsy

My first thought is that you and your husband can each gift £3k p.a. out of capital without its being liable to inheritance tax. Moreover if you gifted nothing last year you can gift a further £3k each this year. You can both also gift free of IHT from surplus income, if you satisfy criteria that someone will doubtless come along to explain shortly. These may be useful instead of, or in addition to, gifting a lump sum at the beginning.

If you want to do it by lump sum, see whether the School will give you a discount if you pay the lump sum direct to it.

getmore4less

Wiganwishes wrote: »

With an eye on IHT issues, if my husband and I were to pay the invoice for our granddaughter's school fees (in a lump sum covering several years) would this be classed as a gift to our daughter and son-in-law, (as they effectively benefit from it by not having to pay the bill themselves) bringing with it the 7 year survival issues?

Any thoughts appreciated.

If your income supports the fees then regular gifts from income would be exempt.

You would potentialy need to show your lifetyle was not using up capital.

You have the other gift exemptions to use as well.

Remember as a couple you have £650k nill rate band to use ayway and the 7 years is for both of you to die which may be a low risk if both in Ok health

gifting does not make more tax due