Inheritance Tax: Your advice if you have time.

mitten_2

Sorry to ask a question which is personal to me and therefore perhaps not all that useful to anyone else on the board but i could really use some advice (mitten smiles sweetly).

My grandmother who is 80 has just sold her house for £215,000. I hate the thought of inheritance tax as my family is really struggling financially. I want to offer my grandmother advice as no one else seems bothered that the money is used wisely now in an attempt to avoid inheritance tax later.

She has 4 children and whatever she decides to do with the money she will make any gifts fair. She lives now in sheltered housing and her pension more or less covers that. What would you advise she did with her money (i already told her to blow it all on clothes and holidays etc for herself but she says there's nothing she wants!!)

Here are some 'am i right in thinking..' questions:

- Am i right in thinking she could gift 3k a year without tax?

- and since she didn't gift anything last year that can mean she can gift 6k this year?

- If she died within 7 years, the money she gifted would still be considered as part of her estate and therefore perhaps make her estate liable for IT?

- The cut off is moving up to £300k this April so so long as she has under that amount when she dies and so long as she has survived 7 years after gifting then the tax man wont get his greedy hands on the money?

- I understand that she can gift a larger sum as a wedding present, is that right?

Thanks for any advice

Fairwinds

mitten wrote: »

- The cut off is moving up to £300k this April so so long as she has under that amount when she dies and so long as she has survived 7 years after gifting then the tax man wont get his greedy hands on the money?

If she has under £300k Inheritance tax won't come into play at all, regardless of how long she survives.

mitten_2

Even if she earns interest on the money from her house which would take her over the 300k?

Andy_L

Assuming she's got to pay to live somewhere that's probably not an issue.

Martins got a god article on this site on IHT avoidance,
http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1090960720,2158,

moonrakerz

Andy_L wrote: »

Martins got a god article on this site on IHT avoidance,

(My underlining)

Has he been elevated to that status already ??????????

mitten_2

moonrakerz wrote: »

(My underlining)

Has he been elevated to that status already ??????????

LOL.

I am going to talk to a financial advisor about this as although I have read documents relating to it, i need it all dumbed down a bit as money issues are not my forte.

CLAPTON

the cutoff for inheritance tax in currently 285,000 and it usually goes up each year in line with inflation.
so if your gran leaves less than 285,000 (after expenses and debts) there will be no tax to pay.

if e.g she left 300,000 then the estate would pay 40% of (300,000-285,000) so 40% of 15,000 = 6,000

she can give away 3,000 each year which is NOT treated as a potentially exempt transfers i.e. it will NOT be taxed irrespective of when she dies. and yes if she gave nothing away last year then she could give 6,000 this year.

she can also give away anything she likes if it is from normal income i.e. not from capital, so she could give the interest away each year without tax implications...

so i'ld say there is not real problems in your grans situation.