Saving Inheritance Tax with Discretionary Trust Wills

SMARTY29A_2

yes all is now sorted and solicitor paid, well as you know, they deduct their monies first.

this was my thoughts
1) for my dad to transfer house onto me and sis name as he owns it outright
2) to gift us some monies to put in a high int bank account

or could, if we go down route of deed of variation
get something like the above worded into the will.

Andy_L

SMARTY29A wrote:

this was my thoughts
1) for my dad to transfer house onto me and sis name as he owns it outright
2) to gift us some monies to put in a high int bank account

if 1) and he doesn't pay you a fair market rent it counts as "a gift with reservation" and will still be liable for IHT.

with 2) there are gift limts per year which will be outside IHT (£3k/year IIRC) any more than that and, if he dies within 7 years of the gift, they will be subject to IHT

SMARTY29A_2

so what best to do re if we do opt for deed of variation???

margaretclare

I don't know, Smarty. It's mainly down to what your Dad wants to do. As has already been said, he can't give his house away and continue to live in it rent-free. If he pays you an economic rent, as he's expected to do, that's income which you'd have to declare on your tax return. He can give a certain amount in gifts to both of you every year, but over and above that he can't 'deprive himself of assets'.

Another thought is - although at present your Dad has money that he doesn't need for living, he doesn't know what his needs may be in the future. What if he needs to pay for care either in his own home or in a residential home? He may consider buying an 'immediate needs annuity' and this has been discussed before. I hope he's not thinking of giving away all his worldly possessions and throwing himself on the mercy of Social Services, if that should become necessary?

DH and I are at present in the fortunate position of not needing all our income for living expenses, but we don't know what we may need in the future, that's why we're still saving!

Margaret

Tiggs_2

Andy_L wrote:

with 2) there are gift limts per year which will be outside IHT (£3k/year IIRC) any more than that and, if he dies within 7 years of the gift, they will be subject to IHT

not quite - unless the gifts are above the nil band then the gift wont be taxed even if death is within 7 years (the nil band will be lowered but thats not the same)

SMARTY29A_2

thanks for your opinions but still none the wiser

SMARTY29A_2

on whether to go for deed of variation and for my dad to give us some money for the future

margaretclare

SMARTY29A wrote:

on whether to go for deed of variation and for my dad to give us some money for the future

I think sloughflint explained it really clearly in #25 above.

As I understand it there is nothing stopping your Dad doing whatever he wants to do. It's HIS money after all, and although he doesn't need it now, he may do so in time to come. OTOH he can give away sums every year to his nearest and dearest (children and grandchildren) and it may give him pleasure to do so. I hope that his money is invested somewhere that it can continue to grow?

Read sloughflint's post #25 above. I'm sure you'll understand it if you take time over it.

Earlier you wrote: "my mum died over a year and finally all sorted out with solicitor, probate etc. My dad owns his house outright, no debts and they both have/had a will leaving all to either spouse and upon the last survivor leaving all to me and my sister".

It seems that your parents' intention on making their wills was to make sure each other was taken care of first and that legacies to you and your sister would only come into play on the death of the second survivor i.e. your Dad. You say you're financially secure but you've brought your children's needs into the equation, you mention a deposit on a flat for them. This was obviously not thought of at the time your parents made their wills. It would have been perfectly possible, as you're financially secure, for your parents to bypass your generation completely and leave all assets to be divided equally among the grandchildren. This is what DH and I have done, given that his son and daughter, and my surviving daughter, are also financially secure. Whatever we leave behind is to be split 5 ways between grandchildren, 3 of mine and 2 of his. I would not like to have left assets to children only to have them bring grandchildren into the equation - I'd prefer to do that at the time of making our wills, so that no one has any doubts at all about our wishes and intentions.

Margaret

EdInvestor

Smarty

What's the total value of your dad's assets?If they are less than 285k (shortly rising to 300k) there will be no IHT to pay.

There's nothing you can do about avoiding long term care as deliberate deprivation of assets isn't allowed. In any case, he should be able to cap any shortfall there with an immediate needs annuity, which would still leave you a very ,decent legacy. That's if he needs it, which he probably won't as it only affects a minority.

Jake'sGran

For Tiggs

I have not read this section before but wish I had. The solicitor I visited today was not able to give financial advice. He recommended I go to a company like your's i.e. financial accountants and then take the information gained (and paid for) to a solicitor to draw up the will. But the first solicitor I contacted some months ago had quoted £500 for a tax efficient will and I'd thought this expensive (I assume they have the necessary expertise and can do it all). Reading through this thread makes me realise I was wrong about that. Does your company charge £600 just for the financial advice and then there is a solicitor's fee on top of that?

With regard to having the house owned as Tenants in Common, we did this by making the appropriate declarations and cross-signing them both and attaching them to the deeds. This did not cost anything and I am a bit surprised that more people are not made aware of it. It is not necessary to buy a form from the Land Registry.