Inheritance, Investments - Advice Needed

Firefly

Yes, she does have a will.

I will make the suggestion of an accountant (infact I guess my brother would have one).

Thanks

Quarantz

Putting the money into a trustfundconstruction with the people that should get the money (including your mother) is a legal and good solution. It asks an initial invetsment for the costs of setting up the necessary trust etc (legal costs, fees like that), but after that you can save about all of the taxes. The details of how to do this I will not post at this moment, bacause as a 5 minute newbie here I don´t know for sure whether I would brake a rule I missed when reading them. I found all these info while investigating taxsaving possibilities for my company.

dunstonh

If it is estate planning, then an IFA would be a better bet than an accountant. Although there are areas of overlap there. Chances are the accountant would get their IFA involved.

Ted_Bloke

Well, as I predicted this weekend's Times and Sunday Times are full of it.

But I think - note I am no kind of professional and am only writing because I hate the idea :mad: of anyone paying such an objectionable tax - it is mostly irrelevant for your question, and you have already stated the important principles yourself.
The point is your Mum's estate is only just above the threshold of £285K. Maybe a bit more beyond it than you think, because the Tax authorities can take account of other goods and possessions than the ones you mention (and it would be good to hear from someone with experience of that).
Now someone else with an estate twice your Mum's, say £600K, that estate won't pay twice what your Mum's will, it will pay 40% of the excess over the threshold, i.e. 40% of £315K = a stinking £125K, an estate of £750K pays £186K and so on, if nothing is done to mitigate it. So you can understand why all these tax-avoidance schemes, trusts etc. are devised. And - this is mainly what all the hoo-ha in the papers is about - that Brown is trying to put a stop to them including the ones already in place.
But I think none of this is a real concern with an estate only just over threshold.
For that reason all this trust business is IMHO not only an irrelevance, but I draw your attention to the red highlighting below, and say

Quarantz wrote:

Putting the money into a trustfundconstruction with the people that should get the money (including your mother) is a legal and good solution. It asks an initial invetsment for the costs of setting up the necessary trust etc (legal costs, fees like that)

That is your only certainty if you go for trusts.
All the news that concerns you is the future increases in threshold given in those sources I mentioned.
It is so simple to just go below of the threshold by some give-aways.
Yes, you're right, if she gives £7,000 away £1,000 of that becomes exempt after a year, another £1,000 the following year and so on. If she gives £70,000 then £10,000 becomes exempt the first year etc.
I don't agree it's hard to find info., the HMRC's site sets out the situation clearly enough (they are probably in the throes of updating it at this moment). I don't think you need any high-powered City financier and fancy schemes, some ordinary professional you know and trust be he/she accountant, FA, family solicitor. should be sufficient. Doing it in the next months while your Mums mental condition is also OK seems a good idea, you never know.

I don't understand why you posted this thread in the Savings section, there is a Tax section where you might have got better attention. I would be interested if anyone has any comments on my query about the rent-a-room scheme in my previous post.

Quarantz

Ted_Bloke wrote:

For that reason all this trust business is IMHO not only an irrelevance, but I draw your attention to the red highlighting below, and say
Quote:
Originally Posted by Quarantz
Putting the money into a trustfundconstruction with the people that should get the money (including your mother) is a legal and good solution. It asks an initial invetsment for the costs of setting up the necessary trust etc (legal costs, fees like that)

That is your only certainty if you go for trusts.
All the news that concerns you is the future increases in threshold given in those sources I mentioned.
It is so simple to just go below of the threshold by some give-aways.
Yes, you're right, if she gives £7,000 away £1,000 of that becomes exempt after a year, another £1,000 the following year and so on. If she gives £70,000 then £10,000 becomes exempt the first year etc.
I don't agree it's hard to find info., the HMRC's site sets out the situation clearly enough (they are probably in the throes of updating it at this moment). I don't think you need any high-powered City financier and fancy schemes, some ordinary professional you know and trust be he/she accountant, FA, family solicitor. should be sufficient. Doing it in the next months while your Mums mental condition is also OK seems a good idea, you never know.

Don't you pay (high) taxes on inheretances in the UK? The trust-construction, I really don't understand your negativity about them as they are legal, is not only there for the moment of NOW, but also for LATER. It's a fine way to avoid (legal) as much tax as possible, not to evade (illegal) taxes. It's logical that setting up a legal entity costs money, but I think it's worth it. And no, I don't work in that field of work and don't sell them. I think it's a possibility worth talking about with your financial planner.

EdInvestor

cheerfulcat wrote:

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.

Indeed, I think GB has just made this thread redundant on the IHT front

If she has 310k invested to give income of 5% say, that's 15,500 a year before tax - see that accountant!

Does she need all of that to live on?

If not, that might well be the source from which gifts could come.

BTW: note that dividends from shares will be tax free, unlike interest.

dunstonh

If she has 310k invested to give income of 5% say, that's 15,500 a year before tax - see that accountant!

Depends where you place it and how you do it. A trust could take the whole amount out of the estate (over a period) and allow 20 years of 5% to be paid with no tax liability. (income or other)

Firefly

Sorry Ted Bloke, I did start my thread saying I wasn't sure where to post it. :-(

Thanks for all your input, plenty of food for thought. I will consider, ponder and discuss with family.

You're all amazing!

cdon

Can I ask a related question about trusts. Does the money immediately fall out of the estate or is it the same as giving the money away ie only after 7 years?