Another Inheritance Tax question

margaretclare

Jake'sGran wrote:

I am now considering reducing my capital by making payments to the mortgages of my two children.

Don't ever reduce your capital - who knows what you may need in the future.

Instead, make payments from the income of the capital.

Margaret

Robert_Sterling

margaretclare wrote:

Don't ever reduce your capital - who knows what you may need in the future.
Instead, make payments from the income of the capital.
Margaret

Whereever the money comes from it will reduce the money remaining.

EdInvestor

But gifts from income can be unlimited as long as they are regular and don't affect your lifestyle - unlike gifts from capital they do not attract IHT, there is no 7 year rule. The limit on tax free gifts froim capital is 3k a year IIRC plus a few small amounts.

Robert_Sterling

My thoughts exactly Sloughflint

margaretclare

EdInvestor wrote:

But gifts from income can be unlimited as long as they are regular and don't affect your lifestyle - unlike gifts from capital they do not attract IHT, there is no 7 year rule. The limit on tax free gifts from capital is 3k a year IIRC plus a few small amounts.

Yes.

I don't understand what sloughflint means by 'what if the income from the capital was also required - once the money has been used up...it has gone'

But as long as you have the capital it will be generating income. Once you start biting into capital it's not there to generate income.

I don't know about anyone else, but IMHO it seems that we spend a lifetime trying to accumulate capital and then there are those, on threads like this, who either want to get rid of it, or to tie it up in legal trusts for the future.

Many people are wasting the remaining years of their lives in worrying about the issues of IHT/care costs when there is life out there to be enjoyed and many more important issues to be concerned about. Take a look at the front page of today's 'Telegraph' for instance, for an example of an important issue of the day. And then look at this: http://www.thecep.org.uk/

Margaret

home_alone

See we are back on the greedy bulling kids again, It really depends on how much you have, how much you need and how much you love your kids I gave a 6 figure sum to my eldest for a house purchase this week and my other kid gets hers early next year, this reduces my capital to a more workable level I am 63 wife is 65 our kids/grandkid are the prime source of our enjoyment these days.

gary

margaretclare

Hi gary

No one has mentioned 'greedy kids' recently! I have simply said that if you reduce capital it is not there to generate income.

However, it is entirely up to you what with you do with it, whether it's capital or income. If you don't need it then it's probably best to give it away early, at a time when it will be most useful, rather than spend ages agonising about what kind of trusts or wills to 'safeguard' it with.

I just wish I had the price of a house, or even a deposit on a house, to give to my homeless granddaughter! I am poised to help her with furnishing and equipping whenever she gets some kind of a place of her own, rather than sleeping on her uncle's sofa in his one-bedroom council flat, but if I had six figures to give her, she could certainly have them.

Margaret

Mrs_pbradley936

home_alone wrote:

See we are back on the greedy bulling kids again, It really depends on how much you have, how much you need and how much you love your kids I gave a 6 figure sum to my eldest for a house purchase this week and my other kid gets hers early next year, this reduces my capital to a more workable level I am 63 wife is 65 our kids/grandkid are the prime source of our enjoyment these days.

gary

Gary I agree with you up to a point but we did a similar thing with our eldest son and have regretted it ever since. It made him have an “easy come easy go” attitude to the point that his wife left him, he spent all the equity he had in his house over £250K within a year on fancy restaurants and holidays. He is now 36 and not only broke but has huge credit card debts. It has caused no end of family rows because my husband will not give him a penny and what is worse refuses to help our other children in case they go the same way. We do know what it is to do with out and to save and foolishly tried to protect eldest son from that anguish alas we should have let him struggle to find a deposit he may have learned to value money more.

home_alone

pbradley936 wrote:

Gary I agree with you up to a point but we did a similar thing with our eldest son and have regretted it ever since. It made him have an “easy come easy go” attitude to the point that his wife left him, he spent all the equity he had in his house over £250K within a year on fancy restaurants and holidays. He is now 36 and not only broke but has huge credit card debts. It has caused no end of family rows because my husband will not give him a penny and what is worse refuses to help our other children in case they go the same way. We do know what it is to do with out and to save and foolishly tried to protect eldest son from that anguish alas we should have let him struggle to find a deposit he may have learned to value money more.

Just because I gave him the money dos not mean I will not keep a watching eye over it although I trust him only real problem for the future is if he meets a greedy bulling wife, then the gift becomes a loan and he gets a slap around the ear.

gary

Tiggs_2

margaretclare wrote:

I just wish I had the price of a house, or even a deposit on a house, to give to my homeless granddaughter!

If you have little to give away then are you best placed to advise others on what to consider?

For many people to hold onto assets they dont need is pointless - and while that may be hard to grasp for those without that nice position....its still the case.