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

localhero

Nikim, I'm not sure I fully understand the transaction - but to keep things simple - if after the series of moves the value of your parents' estate has declined and yours has increased - then this value would be classed as a gift (or PET) from your parents.

Bully, Inheritance Tax is levied on the market value of the estate and is deducted before the beneficiaries are paid out. So in short - the answer to your question is no, you won't be taxed on the shares you inherit.

smartiecat

Hi could anyone help me. Im really struggling with a high mortgage and debt and my dear kind mum has offfered to give me £30,000 to alleviate things a bit. is she allowed to do this. She does not fill in a tax return at the mo, as she is taxed at source.
be very grateful for aany advice.

RayWolfe

Yes she is.
There may be problems with Inheritance Tax should she die within 7 years and/or if she ever needs Council help with a nursing home. Otherwise, no problem at all.
Is she looking for a new son at all?

glasgow_oldie

A relative in mine who is 53 has cancer but with a relatively good life expectancy. She is a single parent with 2 teenage daughters to whom she wants to give the house, worth 500,000, in the expectancy she will live more than 7 years.
Is there any way of doing this that ensures she can continue to live there without the daughters ejecting her in a few years and that would enable her to sell up and downsize in the future if she turns out to live a very long time.
I have read up about discretionay trust wills but cannot seem to discover if these are suitable for thiis purpose

RayWolfe

Obviously she can't give something away AND retain control of it!
Looks like tax evasion as you describe it. Is that the intention?

sloughflint

RayWolfe wrote: »

Looks like tax evasion as you describe it.

Does it? It just looks like a tax avoidance attempt to me from someone who doesn't understand how things work.

glasgow_oldie wrote: »

A relative in mine who is 53 has cancer but with a relatively good life expectancy. She is a single parent with 2 teenage daughters to whom she wants to give the house, worth 500,000, in the expectancy she will live more than 7 years.
Is there any way of doing this that ensures she can continue to live there without the daughters ejecting her in a few years and that would enable her to sell up and downsize in the future if she turns out to live a very long time.
I have read up about discretionay trust wills but cannot seem to discover if these are suitable for thiis purpose

Even if she survived 7 years, the house would still form part of her estate if she continued to receive a benefit ( ie live in it rent free)
It's a non starter.

SeniorSam

glasgow_oldie wrote: »

A relative in mine who is 53 has cancer but with a relatively good life expectancy. She is a single parent with 2 teenage daughters to whom she wants to give the house, worth 500,000, in the expectancy she will live more than 7 years.
Is there any way of doing this that ensures she can continue to live there without the daughters ejecting her in a few years and that would enable her to sell up and downsize in the future if she turns out to live a very long time.
I have read up about discretionay trust wills but cannot seem to discover if these are suitable for thiis purpose

Glasgow Oldie.....

Consider it a non starter, but depending on how far you wish to go with this, there are ways (all be it, expensive) that have been used in the past to help reduce inheritance tax......... which I feel you are possibly looking to do.

Firstly, if downsizing your home and using surplus equity to gift, either directly ,or in trust to the children is not an option, then you could look at Mortgage Equity Release, where you do not sell any part of your property.

Releasing say £200,000, you could then gift that into Trust to the children and after 7 years it would be exempt from your estate and they get it when you have died.

You could still move house whenever, or stay put, have no repayments to make, but interest is charged on the releaseed sum and the total amount is repaid from your estate when you die or have to go into long term care.

If you do consider this route, make sure you only deal with a reputable IFA and a good solicitor and the lender should be a member of SHIP.

You have a nil rate band allowance that is free of inheritance tax and amounts to £325,000 in this tax year ... usually increasing each tax year, so if your estate when you die is below that, then no inheritance tax is payable.

Hope this helps

Sam

masplin

Hopefully this is a trivial question, but from the little I know about trusts I suspect it won't be!

My mother is looking to give away £50k to me to reduce her IHT liabilty. I am aware this is a PET. I do not want the money in my estate so want to gift the money from her to my 3 children (ages 10-14). I do not mind them receiving the interst on the money, but would ideally not give them automatic right to the capital at 18. A Bare trust is therefore out. I am concerned that for such a small amount the cost of getting a professional to set up and run a trust makes it an expensive exercise.

Is there a simple trust I can create and run on my own for them that gives me discretion over the capital payments and doesn't get hit with a 40% income tax charge? Is there anywhere to get a DIY trust done or do you have to use a professional?

Thanks for any advice

Mike

margaretclare

Why doesn't she give the money to the 3 grandchildren herself?

She could set up a trust for each of them herself for when they're older, with proviso that they get access to the money at a specific age/on getting married/to buy a house, whatever.

I don't understand this at all.

masplin

Sorry bad english that's what I mean is she gives it to the children directly. The question is what trust, from whom etc etc

Mike