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

margaretclare

Oh I see.

Giving large sums to children of that age - she obviously doesn't want them to get access to it immediately, wants it to be kept for a specific purpose or when they reach a specific age. It should be invested for their use when that age or happening occurs. You'd need an expert (or she would) but I'm sure it should be possible.

localhero

masplin wrote:

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?

I'm afraid your piece of mind will come at a cost. Members of STEP are best at that this sort of thing.

masplin

So the implication is NO you can't have a DIY trust or a cheap wrapper provided by someone like Alliance? Seems odd in this day and age of DIY pensions!

grizzy

Hello

I was reading through the Martins bit on inheritance tax and that the government has said that the newer rules are backdated indefinitely.

My mother died in 1998 and left all of her estate to my father who died in 2007 just before the rules changed. we had a £300k allowance before paying inheritance tax on the rest of the estate. Am I correct in thinking that my mothers share should have been added on so that there was 600k before tax? Or is it just wishful thinking. I hate to pay the government more tax than necessary!

Thank you for your advice

James_Trimby

Hi Grizzy The new rules look back indefinately for the first death NOT the second. So if your father had died just after the rules changed then you would be correct and you would get a doubling of the allowance. Unfortunately as this does not appear to be the case you don't.

grizzy

Ah well it was worth asking. Thank you for answering!

KAMH

Hey clever people, please answer a question for me.
If someone dies leaving an estate of, say, £1.2m and the will states that £600k should go in trust for the child and the residuary to the surviving spouse, would the tax only be payable on £600k less the current exempt amount as the residuary is tax free? Would it make a difference if the couple were amicably living apart but did not divorce for tax reasons? I think I must have got it wrong because an extraordinary amount of tax seems to have been paid and I totally don't understand all the schedules etc that the solicitor has filled in. I'd like to get help but am scared stiff of getting yet another enormous bill for finding out that everything has been done as it should have been!
Hope to hear from someone.

James_Trimby

Hi KAMH for IHT separation is ignored so for IHT still married and subject to the exemptions Therefore if we are talking about 2008/9 tax year I would expect tax bill to be £600,000 less £312,000 exemption = £288,000 * 40% = £115,200 or thereabouts. IF divorced tax bill would be on the lot ie about £355k. They do also have to look into gifts to non spouse in last 7 years before death, which could up the tax bill.

IF there is alot of family "trust" in this situation might be worth looking at a deed of family arrangement leaving all to surviving spouse. And for her/him to then set up a trust for the child for the £600k. WOuld avoid an immediate charge. The surviving spouse would get a double exemption on death and the £600k could be exempt if surviving spouse lives 7 years plus. This would need the trustees consent which might be v difficult for them to give as turning down monies doesnt seem logical (and they cannot place a condition on survivor to do the new trust) need legal help on this as I'm only an accountant!

YOu have given very brief details for a large estate so please take above with pinch of salt but hopefully this helps?

Barton52

Hi,
Just want a general view before going to a tax adviser. My father died without making any iht provisions. His estate is around £800,000 in total (including house owned jointly by my mother).

So we are considering varying his will which left us 3 children having about £50,000 each and most of the rest to my mother.

Would we be better off (Ie pay less tax) by using up his iht allowance of £325,000 and then transferring the balance to my mother, or transferring everything to my mother and her then having £650,000 allowance and making us three immediate gifts of say £200,000 each hoping that she will survive for 7 years thereafter? She would then have sufficient to pay for home care etc. without it impacting on her income (her current income is sufficient for her current needs).

Any views welcome!

SeniorSam

martinm wrote: »

Sloughflint, my father died 22 years ago, by brother 10 years ago. The house is all paid for, not sure if that helps answer you?

I have just been made redundant, 3 weeks ago, so one thought was to keep the house and rent it for income if the future.

Martin

Hi Martin,

sorry to hear about your mother's death.

If the estate was worth £420,000, her nil rate band allowance was £325,000, so at worst the tax is only £38,000.

However, if your father left his estate to your mother, then the allowance is doubled to £650,000 and therefore no inheritance tax at all.

Hope this helps

Sam