Inheritance Tax Planning

brodev

CORRECTION: In my earlier post I said "to my wife" I should have said "to my children" oops silly me :-[

System

Hi All

Have been reading your IHT tips with interest. My father died 7 years ago, the house and half of his estate was left to my mother, the remainder was left to myself and siblings (5 in total). We had to pay IHT on what he left to us.

My mother is now worried about the tax bill we will recieve when she passes away. I have talked to her about 'the gift', say she signed the house over to her children, then each has an equal share to help cut back on her estate value, but have recently be informed the goverment has stopped parents making these gifts.

Any advice would be helpful.

Thanks in advance

MSE_Martin

A quick note on advice

This is a great thread - i'm pleased people are taking the IHT issue on with great interest. As i note in the article - this is one area where i do think unless you are an expert - good advice is worth paying for.

However that doesnt mean the layman and experts giving answers in here aren't worth while. It's a great start point to see what can be done and to feed through on different advice that's been received. To be informed before seeking professional advice is always the best strategy

martin

System

Sorry Paul Varjak - that wasn't intended to cause offence - just to point out that it can be costly to rely on imperfect advice.

Shirley Moore - for what it's worth I can confirm that if your Mother's total estate is under £263,000 then she will not be taxed if she makes lifetime gifts to you, no matter how large. It is only when someone is worth over £263,000 that making these gifts may result in extra IHT being paid. (But of course she should only make gifts to you if she is sure that she will not need the money herself at a later point).

System

As a Grandparent I pay the school fees of my grandson at the present. I understand from professional advice that, if when I die he is still at this school, the total amount required for him to continue at the school will be taken from my estate before inheritance tax is assessed. Am I right in this? :-/

Jaime_Bien

Most banks etc. are prepared to release funds to pay IHT and probate court fees prior to Grant if they have a D20 or a letter of authority for the executors/administrators and a copy of the Inland Revenue account (IHT200) - the funds will be TT'd or drawn in favour of Inland Revenue and HMPG respectively.

System

My parents were advised to take out some kind of insurance policy that would mean us paying less IHT. Myself and two siblings now split the premium between us as we will benefit. Is this a good thing?

My husband and I started such a policy with Norwich Union a few years ago. Then I read a newspaper article about an elderly lady who's premiunms had increased so much she could no longer afford to continue the policy. I checked our small print and discovered that after 10 years the policy is reviewed and either the premiums increased or the benefit reduced. These reviews continue throughout the life of the policy. These policies are no longer recommended to cover IHT and we cancelled ours before it had cost us too much.

Jaime_Bien

Roy - I would be interested to know on what basis your adviser feels that, post death, the amount equal to rest of the school fees will be earmarked for your grandson free from IHT, unless you already have a trust set up for him.

The payments themselves, I expect, will be exempt from IHT as dispositions for the maintence of family or, depending on the amount, normal expenditure from income.

Plumpud_3

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!!!!!

Have you considered an interest only mortgage, secured on the property. The capital to be repaid when your Mother's house is eventually sold (for whatever reason). As I understand it, this reduces the IHT bill too.

My Parents took out an equity release 6 months before my Dad died suddenly. My Mum can't sell the property without losing a huge chunk of the value to the lender (far more than released). As she can't drive, she would like to move nearer to us (we are 40 minutes away, not close enough for an everyday visit). If they had taken out an interest only mortgage, they could have paid it themselves, or failing that, my Sister and I could have paid it. She could sell the house and move where she likes.

I didn't find out this possibility until afterwards, from listening to 'Moneybox' on Radio 4.

Plumpud_3

My husband and I started  such a policy with Norwich Union a few years ago. Then I read a newspaper article about an elderly lady who's premiunms had increased so much she could no longer afford to continue the policy. I checked our small print and discovered that after 10 years the policy is reviewed and either the premiums increased or the benefit reduced. These reviews continue throughout the life of the policy. These policies are no longer recommended to cover IHT and we cancelled ours before it had cost us too much.

I have been researching IHT since both the death of my Father and the death of my Sister-in-law's Father.

I read in the Financial Pages of the Daily Mail, sometime in the last 18 months, that Life Insurance premiums to cover IHT are inappropriate, and can be considered mis-selling. I actually cut the article out and sent it to my Sister-in-law. I've tried to find it on thisismoney.com (financial website of the Daily Mail etc.), but haven't been able to.

I would strongly advise anyone who is likely to come under IHT to see an Accountant specialising in it. Financial Advisors know about their products, but not about the complexities of IHT.