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

SeniorSam

martinm wrote: »

I am new to IHT, my Mother died 4 weeks ago, I am the only son.

The house and saving add up to about 420.000 pounds. Looks like I will pay 48k tax bill, do you think that is correct?

If I went to a financial advisory etc do you think they will save me more than the costs that they will charge for their services?

I have downloaded all forms etc and looks straight forward just a lot of money to pay out !!

Thanks

Martin

Only £38,000, but if your father left his estate to your mother, then there are both allowances of £325,000 that can be claimed and therefore no tax.

Sam

James_Trimby

Barton52 wrote: »

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!

HI IF you mother were to live another 7 years without a doubt you would be better off leaving all to her and then her gifting the amount she can afford straight after. After the 7 years gifts are ignored and she still has double the personal allowance at that time. IF THE TAX RULES ARE THE SAME WHEN SHE DIES (the ever present problem with IHT planning!) Under current rules even if she were to die a week later you would be no worse off so generally I would agree with your last idea. The only downside is that the gifts will then be taken into account if looking at nursing care etc but if she can afford this anyway not a problem. Please note the gifts should be what she can afford and not be structured purely for tax it is important she does not have to go to children asking for monies back in the future because there is not guarentee that it would be available. (sorry to sound pessimistic but I've seen it happen!)

12febuary

We have just converted from joint ownership of the property to tenants in common. The advice I would give is to make a new will at the same time and look at either spouse becoming trustees of either of their estates. Sounds complicated but once you have your head around it, it become clear. We used a will expert rather than a solictor.
Tenants in common seems a really good way to protect assessts if there is second families or other complications.

SeniorSam

Didn't notice it had been ansewred!
Sam

sharon1953

I understand about a property and savings etc being calculated as part of the estate of the deceased, but what about any life policy payout, does that count as part of the estate, and therefore liable for inheritance tax if it takes the amount over the limit for nil tax?

jem16

sharon1953 wrote: »

but what about any life policy payout, does that count as part of the estate,

Life insurance policies fall outwith the estate and would be apid to the nominated beneficiary.

Willman_Rodders

Sorry JEM 16 but your statement:

Life insurance policies fall outwith the estate and would be apid to the nominated beneficiary.

is not strictly true.

The policy proceeds from a life policy that is placed into trust does not form part of the deceased's estate - and therefore does not incur IHT. The proceeds from a life policy that is payable to a third party on the 'death of another' also does not form part of the deceased's estate. But ...

The proceeds of a life policy payable to the life assured and that is not placed into trust does form part of the deceased's estate, and the value will be added to the other assets to determine if inheritance tax is due.

Mary_Hartnell

What are the rules and regulations about taking out a life insurance policy "in trust".

Somehow I cannot see see it being possible for a billionaire to pay 1,000,000 to an insurance company and then die 9 months later, even if the insurance company only paid out 900,000, to save 400,000 in tax?

localhero

Mary_Hartnell wrote:

What are the rules and regulations about taking out a life insurance policy "in trust".

Somehow I cannot see see it being possible for a billionaire to pay 1,000,000 to an insurance company and then die 9 months later, even if the insurance company only paid out 900,000, to save 400,000 in tax?

In the 2006 budget the treasury announced that any new life policies written into trust would attract IHT of around 6%.

This is not my claimed area of expertise, but a decent financial adviser should be able to explain in greater detail how it might apply to your circumstances.

Mary_Hartnell

I don't really have "circumstances", but I do take an interest.
This written in trust always seemed to be a self evident way of dodging intergenerational IHT.
When poor old grandad dies you kids/grand kids get the proceeds of this policy tax free (?!?).
So are you saying that the policy is now treated as an asset of a trust and subjected to a liability to the periodic IHT charge of 6 percent every x years?
In these circumstances grandad might as well give away the money and hope to live 7 years?