Inheritance, Investments - Advice Needed

Firefly

Sorry if this is the wrong place to be posting this thread. I would welcome advice from the wise ..!

My mum who is 86 has just sold her house to move in with my sister. Her health is good but she didn't want the worry of upkeep of the house and she is happy for her to be there (she's single with no family) and has room, etc. etc. Mum has sold the house for £260k and probably has another 50k in shares/savings, etc.

She leaves all her financial affairs to my brother but intends passing some money on to us so that, in her words, she can see us enjoy it rather than wait until she has gone.

My understanding is that she can give 3k to each of us per year, but she will probably get more in interest (if invested wisely) than she can give away so she will lose out by paying tax. She does currently pay tax as she has a good pension, etc.

I don't want to appear moneygrabbing, but this bit of inheritance is the only way I can ever hope to decrease my substantial mortgage.

Any ideas or advice or experience in a similar situation?

Many Thanks.

dunstonh

Invest it and place it in trust could be an option.

Firefly

Would that be invest the whole sum? I don't really know how trust works but would this mean the liability for inheritance tax is reduced?

dunstonh

You place it in trust to remove the IHT liability. The amount invested would be the amount taken out of the estate. The degree of how much and when it comes out of the estate would depend on the trust used.

jenniferpa

Not 3k to each of you, 3K in total (unless this changed in the budget, and I don't think it did).

Jennifer

Firefly

Any idea where I could find out Jennfier?

Perhaps it's just that I don't know where to look but this type of information is hard to come by.

baby_boomer

The £3K limit didn't change, but Brown continues to increase the IHT limits by more than inflation, which may help you and your brother eventually as it will rise to £325K over the next four years.

jenniferpa

Here's the link Inheritance tax

Jennifer

Ted_Bloke

It's all a bit delicate…saying anything about a family's affairs in the circumstances, but: family relations seem to be OK; by the time you add up all bits and peices the estate is appears to be above the IHT threshold, 'fortunately' not by much but still annoying to lose £10,000's money; if you are lucky with investments its value might even rise.
Your Mum is not limited to giving you all £3k p.a., she can give you all as much as she likes.
Rationally the greatest good of the greatest number is realised if she gave, say, £150k???, shared equally between the 3 sons/daughters, maybe with a fairness consideration for who is looking after her by having her in their house, which is after all a financial contribution and may become more? (In fact she could pay for it as rent and services so that it would not count as a gift? PS maybe not such a good idea after all, for your sister that would be an income, taxable, or does the rent-a-room scheme let her out of that too? help, someone) That way you get an immediate relief from mortgage burden, she keeps enough for her reasonable requirements and security I guess, you are sure to waste nothing on IHT.
But it is not a purely rational and financial question, I feel an intruder now.
Of course any FA you ask is going to say "She's made a will? She's made a will? - if not I know a man who will do it for a mere few hundreds."

Sincerely
Mr. Justice Solomon.

Firefly wrote:

Any idea where I could find out Jennfier?

Perhaps it's just that I don't know where to look but this type of information is hard to come by.

jenniferpa wrote:

Here's the link Inheritance tax
Jennifer

For Brown's IHT intentions here's another
http://news.bbc.co.uk/1/hi/uk_politics/4832840.stm
with searchable pdf. of statement.
+ additionally, I've noticed that the quality papers' popular financial columnns recycle the same articles updated at a much faster rate than Beano Comics used to. So any time wait two months and you'll see an article about this in Saturday's Times or the Sunday Times, but as there's just been the budget, without having looked yet I'll bet there's one or two there today and tomorrow.

Firefly

Thanks Ted Bloke. I woudn't have posted if I wasn't welcoming intrusion!

I agree, it's a difficult and senstive subject and probably one I've posted on here because as a family we get on well but feel a bit cagey about openly discussing how mum should spend her hard earned and well deserved savings! Especially when it involves giving them over to us! I am the only one of us for whom the sum of money will be a life changing experience, not least of all because I am the only person with a mortgage (and a single struggling parent to boot! It's also hard talking about what will heppen when a parent dies.

So am I right in thinking that if she gave us all 50k now and she lived for 7 yrs then we wouldn't pay any IHT on that sum, but it goes down on a sliding scale depending on how long she lasts? (see, not the nicest subject in the world).

I have to say that I would be more than happy to give up hope of getting a penny if it meant I could turn back the clock 40yrs. That isn't going to happen. I'm the moneysaving expert of the family, the rest are well provided for so I just want to be sure we're doing the moneysaving thing! Mum and dad started with nothing and we were only talking yesterday how bizarre and incredible it seems that despite years of deprivation in their newlywed war days, she is just about to have 1/4 million pounds in the bank!

cheerfulcat

Hello, Firefly,

Your mum can make any amount of regular gifts out of her income; as long as she still has enough left to live on, these gifts should not form part of her estate.But even if she gives away lump sums, the IHT liability won't be that great; the bulk of her estate will be under the IHT threshold.

It would be a good idea to see a professional tax accountant, btw, as well as a solicitor if she doesn't already have a will.