Inheritance Tax: Save £100,000s with simple advanced planning Article Discussion

getmore4less

DOV can cause more tax as they use up transferable nil rate band.

Savvy_Sue

getmore4less wrote: »

DOV can cause more tax as they use up transferable nil rate band.

Well there you are, that's why you need proper advice, isn't it?

infinity87

Thanks very much for the tips. I like to assume my mum will live a long time yet, she's a healthy 65 year old, but then we assumed that with my father also, you just don't know what's around the corner.

So she is able to offer me and my brother large sums of money as gifts, and there's no tax issues so long as she lives 7+ years? We're obviously trying to do everything legally and above board, however we're also trying to protect the capital my Dad has worked his entire life for.

Keep_pedalling

infinity87 wrote: »

Thanks very much for the tips. I like to assume my mum will live a long time yet, she's a healthy 65 year old, but then we assumed that with my father also, you just don't know what's around the corner.

So she is able to offer me and my brother large sums of money as gifts, and there's no tax issues so long as she lives 7+ years? We're obviously trying to do everything legally and above board, however we're also trying to protect the capital my Dad has worked his entire life for.

Your mother only needs to live April 2021 to be able to leave £1M tax free, through the use of both parents nil rate and main residence nil rate bands, but in you first post you talk about their home being owned as part of the business, which may prevent the main residence nil rate band being claimed. She definitely needs professional advice.

St-George_2

I have bought two properties for the sole purpose of giving them to my Grandchildren. I am quite happy to do this now or upon my death, but I would like for them not to have to pay any tax on the receipt of these. I would be quite happy put them into a trust with immediate effect ? The properties are currently rented out but I do not need the income so I am OK with it being used for their benefit. Their present ages are ten and seven and I am seventy eight but have good stats and am fairly hopeful of being around when the youngest is eighteen.
Is this something that I can get forms from the inland revenue and fill out myself or do I need to consult a professional, if so, how will I know if he is competent.
Cheers,
St-George

Savvy_Sue

I think you need a professional, quite possibly more than one: wills, trusts, general financial planning ... How you know if they're competent or not is a potential problem, but there are several things to think about ...

In no particular order: no-one under 18 can own property in their own right, so a trust would be needed for that, or if you hang on to them for now one would have to be formed on your death if either had not yet reached adulthood. You'd need to select your trustees carefully in either event, they need to be able to manage the properties / make informed financial decisions etc etc etc. Professional trustees will obviously charge for their services.

Do you care if it's fair, if one property ends up worth more than the other?

What if you have more grandchildren?

What if either of them pre-deceases you?

They wouldn't have to pay tax on receipt, but your estate may be liable for inheritance tax.

They might well have to pay capital gains tax if / when they decide to sell, based on any increase in value from the date they acquired the property to the date they sell it.

You and any trustees (either now or later) need to be very on top of all the ramifications of being a landlord.

Deprivation of assets. Unless you have very deep pockets and are certain you won't ever need residential care, hang onto enough assets to pay for the best, because if you run out, your local authority may decide that you gave these assets away in order to avoid funding your own care. I'm not saying that's your intention, but do your sums carefully.

getmore4less

St-George wrote: »

I have bought two properties for the sole purpose of giving them to my Grandchildren. I am quite happy to do this now or upon my death, but I would like for them not to have to pay any tax on the receipt of these. I would be quite happy put them into a trust with immediate effect ? The properties are currently rented out but I do not need the income so I am OK with it being used for their benefit. Their present ages are ten and seven and I am seventy eight but have good stats and am fairly hopeful of being around when the youngest is eighteen.
Is this something that I can get forms from the inland revenue and fill out myself or do I need to consult a professional, if so, how will I know if he is competent.
Cheers,
St-George

Might have been a good idea to have taken the advice BEFORE buying the each of the grandchildren a letting business.


The income tax situation for letting business are not straightforward, sticking the business in a trust for minors will have added complications not just with the income but CGT and IHT.

Keep_pedalling

If you have held these properties for a few years you may have a capital gains liability yourself if you transfer the properties into a trust. You should have taken professional advice before jumping into property as it is very unlikely to be the best solution to what you are trying to achieve, and you definitely need to take it now.

Keep_pedalling

You should also talk the your GCs parents, they are the ones who would be lumbered with a property trust to deal with (unless you appointed expensive professionals) should you die before either child reaches 18.

Cardew

The latest updated version of the IHT article(April 2018) is incorrect. It states:

In the 2018/19 tax year, everyone is allowed to leave an estate valued at up to £325,000 plus the new 'main residence' band of £100,000 giving a total allowance of £425,000.
So for example, if you leave behind assets worth £500,000 (assuming you have just one property), your estate pays nothing on the first £425,000, and 40% on the remaining £75,000 - a total of £30,000 in tax - if you're not leaving anything to charity.

It should read for the 2018/19 tax year the new 'main residence' band is £125,000 giving a total allowance of £450,000. etc etc

How do you contact MSE to get them to correct the article?