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

jem16

MrChips wrote: »

I see the inheritance tax threshold has been raised to £600,000 for "widows". Would this apply to my grandmother in the case above??

http://news.bbc.co.uk/1/hi/business/7035449.stm

Certainly looks like it from the way it read.

Does me a good favour too.

tenuissent

We are within a week exactly of signing and sealing a Trust Fund and special Wills, putting most of our money into the Trust, hoping husand lives for 7 years, having gone through all the interviews, explanations, discussions, emptying savings accounts ready to hand over gigantic cheque next week, etc etc. Everything except the final appointment (already made) for signatures and fees and new will. We are 74 and 64.

Is this now unnecessary? I would love to have that money back to do as I like with, knowing that whichever of us dies last can leave £600,000 to our 6 children without their having to pay huge IHT bills before they even get it. We haven't got much more than that anyway (most of it is the house), and can easily and happily spend it instead of having it all tied up in a Trust.

EdInvestor

tenuissent wrote: »

Is this now unnecessary? I would love to have that money back to do as I like with, knowing that whichever of us dies last can leave £600,000 to our 6 children without their having to pay huge IHT bills before they even get it.

This appears to be the new position.No longer any need for tenants in common, new wills, nil rate band discretionary trusts and the like for married couples' estates worth under 600k.

Same effect as before but no expensive hassle.

tenuissent

That's the phrase I was trying to remember, "nil rate band discretionary trusts". Such a relief, if true. Can't help feeling sorry for the representative of the company who patiently explained things to us on several lengthy, free (so far) visits. This is the second time we have tried to organise things with them only to be pre-empted by budgets. 2003 was the last time things changed so radically that their arrangements fell through.

seven-day-weekend

Wonderful news for us. We were very borderline with the £300,000 but this takes us out of IHT liability completely.:D :beer: :money:

harryhound

I'm sitting on my hands for the next 6 months, while the law is passed and the dust settles.

The old will must carry on for the moment, it leaves just under half of the family home to my children, "Hound-hovel" is not worth 600K.

I'm a little concerned that over on the new thread the consensus is to leave everything to the survivor, and let's be honest this is usually the wife.

There also seem to be some people who think they are taking it with them;
my objective would be to shuffle away leaving by children the minimum of hassle, having planned ahead.

Some husbands know nothing of the price of fish - that is the wife's job. Similarly some wives know next to nothing about law, investments and tax, that boring fiddly stuff has been left to hubby.

There is a well know "joke" from the history of economics that Britain's industrial decline started with the invention of modern false teeth. They enabled "captains of industry" to hang on in there at the AGM, long after they were pipe and slippers material. (eg "Young" Mr Grace - Are you being served?).

I think the chancellor's intention to create rich old widows is good news for luxury high tech care homes; There is now a powerful incentive to hang on to your clients even if they don't know where they are and what day it is.

Just like the saying "a family that eats together stays together"; I would add that a family that invests together stays together.

Harry.

Tiggs_2

the advice to pass assets to the survivor is based on the best way to secure maximum use of any future allowance - no planning concept takes account of the fact your client may be nuts or stupid or both.......that is to be allowed for on a case by case basis.

if you do not trust your spouse then sure, leave it on first death - but in doing so you are taking the less efficient route to compensate for your less than ideal spouse.

localhero

Having considered the matter carefully I have reached the following conclusions:

For those people who have considered/set in motion NRBDT Wills, put your plans on hold. In most cases they won't be appropriate.

The Nil rate band discretionary trust is still suitable in some situations (unmarried couples and those with business assets to name a couple of examples).

Since it is not tax efficient to make gifts upon first death, the easy option is to leave the whole estate to spouse so they receive 2 x the prevailing tax allowance when they die. So if they die in 2010 they can leave £700,000. (What most couples have traditionally done with their Wills in any case.)

But there are couples who still:

1) wish to protect the home from care fees; Or
2) wish to guarantee children from an earlier relationship receive 'their' share of the estate; Or
3) are concerned that surviving spouse will remarry/have more children/run off with the housekeeper/squander the assets

So we know the NRBDT is almost dead, but what of the couples in any of the above situations? (Of which there are many.)

Own the property as tenants in common - but instead of leaving estate to spouse outright, leave them a life interest (ie they can continue living in the property/receive income from your estate). Then on death of surviving spouse your share of estate passes to who you want (rather than leaving things to chance).

Tax-wise this used to cause a problem, not any longer. Much simpler and cheaper to set up, less ongoing legal/taxation issues for the trust and married couples able to double up on the IHT allowances. But most of all it provides certainty.

Therefore married couples (and everybody else for that matter) should still seek appropriate advice so that their wills are written according to their circumstances. Cheap and cheerful mirror Wills will in many cases be suitable, but not always.

localhero

I'm sorry to hear about that Sloughflint. I would definitely abort the DOV for the following:

1) expensive to set up
2) aggravation/expensive to run
3) your surviving parent would be at the mercy of the trustees
4) your family will not save IHT; in fact the opposite
5) there's no other good reason to have one in your case

Assuming your parent did not use any of their nil rate band allowance, surviving spouse will have twice the prevailing nil rate band available to her when she dies. Therefore in 2010 she will be able to leave £700,000.

I also assume the deed has not yet been signed. Since a deed is irrevocable, once signed it's too late.

harryhound

Tiggs wrote: »

the advice to pass assets to the survivor is based on the best way to secure maximum use of any future allowance - no planning concept takes account of the fact your client may be nuts or stupid or both.......that is to be allowed for on a case by case basis.

if you do not trust your spouse then sure, leave it on first death - but in doing so you are taking the less efficient route to compensate for your less than ideal spouse.

It is not so much what your spouse is like now, as what he/she could become in 25 years time.
"Sans eyes, sans teeth, sans everything".