Advice For My Dad Please

Sapphire

SMARTY29A wrote:

thanks for your advice, sorry didnt quite understand when you said tax thresehold is around £ 70,000 per person.

as i say he is thinking about gifting around 10k to me and my sister and 1 k to 5 grandchildren.

I'm not sure, exactly, either, but my sibs and I each received around £70,000 a couple of years ago and I was under the impression that this was the maximum that could be paid without tax being incurred (providing the person who was giving the money would live for seven years after the donation). You probably need to check this with a government website - though I'm sure someone will come along and help out here . . .

For the smaller amount that your father wishes to give to you, you should be OK as far as tax is concerned (i.e. won't have to pay any), providing your father lives for seven years after the donation.

Sorry if I made things more confusing for you.

Chrismaths

There's no such thing as a 70k threshold.

If your pa gives away £25k as you suggest then if he survives 7 years from the date of the gift, you are home free. If he doesn't, then £6k of that will be exempt from inheritance tax (as coolagarry says), and the remaining £19k will be added back into your father's estate.

From years 0-3, all of this will be liable to IHT (assuming his estate is in excess of the nil rate band (£285,000 currently)
From years 3-4, 80% of it will be taxable, 4-5 will be 60%, 5-6 will be 40%, 6-7 will be 20%.

One way to avoid this is if your mother's will only had your father as a beneficiary (or alternatively all beneficiaries agree) would be a "deed of variation" (DoV). This changes your mum's will, and has the effect that she gave it you rather than your pa. For the amounts you are talking about, it may not be worth it, but your pa's estate is currently worth around £300k, so if the value of his house and/or investments grow it will be liable to IHT. So if you set up some form of trust through a DoV, where your father benefited from the trust in his lifetime, but upon his death you and your sister/ grandchildren got the remainder, it would mean that he would be unlikely ever to pay IHT.

This is not advice, I'm just saying what is available - my only advice is that if you want to do something about IHT you should take professional advice.

HTH

Tiggs_2

Chrismaths wrote:

From years 0-3, all of this will be liable to IHT (assuming his estate is in excess of the nil rate band (£285,000 currently)
From years 3-4, 80% of it will be taxable, 4-5 will be 60%, 5-6 will be 40%, 6-7 will be 20%.

Taper relife will have no relevance here.

any gifts your dad makes are going to be less than the NRB (285k) so if he lives 7 years your fine.

if he dies within 7 years his NRB at the time will be reduced by the value of the gifts made now. This means the ESTATE will pay more tax at 40% but the GIFTS will pay NO tax.......therefore NOTHING to taper.

Chrismaths

Sorry. Tiggs is right. Shows you shouldn't rely on people on bulletin boards!

Tiggs_2

Chrismaths wrote:

Sorry. Tiggs is right. Shows you shouldn't rely on people on bulletin boards!

yeah, just listen to the commision grabbing, non fee based, non IFA, product salesman....at least we know what we are on about

SMARTY29A_2

okay thanks all

but what should we do then???????

get the 10 k each from dad or make a change to mums will as it had my dad as beneficiary, then upon his death me and sis.


we (me and sis) dont need the money but my dad would like to give us some

Chrismaths

yeah, just listen to the commision grabbing, non fee based, non IFA, product salesman....at least we know what we are on about

Taken with good grace I see! I'll stick to investment management, and you stick to fleecing grannies.

Jake'sGran

Chrismaths wrote:

Sorry. Tiggs is right. Shows you shouldn't rely on people on bulletin boards!

Sorry if I have the wrong angle on all of this but I have been worried about IHT and feel I need to make a new will soon especially as I have a heart condition. A couple of weeks ago I went to see a solicitor for a free half hour consultation and showed him a typed sheet of my intentions decided upon as a way of avoiding IHT, i.e.
Daughter to get my half of property (tenants in common arrangement) plus approx £40k, son to get £40k, spouse to have balance which would easily let him live in comfort for rest of his life. Grandchildren looked after already by £3000 yr rule.
The solicitor indicated that this arangement would be satisfactory except that if my daughter ever became bankrupt or something similar she could insist the house be sold. I maintain that this could never happen as she has a very comfortable life, good job and pension etc. and simply would not do it anyway.

From the postings that have gone before I am getting the impression that there would be tax to pay by the beneficiaries if I did not live for 7 years.
Is this correct? If so, it seems strange that a qualified solicitor did not mention any likelihood of it.

SMARTY29A_2

okay but what should i advise dad to do?

cheerfulcat

Your father can apply for a deed of variation ( sort of a retrospective re-writing of part of the will ) so that the money he wishes you to have is left directly to you through your mother's will. This avoids any possible IHT problems. Tell him to see a STEP practitioner.