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

localhero

Barton52 wrote:

Unfortuantely my dad did not make any iht provisions and left a home made ambiguous will. we are left with a situation where we need to vary the will to clarify it.

On the one hand we (3 siblings) can take the tax limit and pass the rest to my mum - about another £200,000. She has said she would then pass it on to us, but would that be looked at as a circular transaction? If so would we then possibly be liable for IHT on that amount from both my dad's estate (ie we didn't pay tax on it when it was in his estate) and then again from my mum's estate should she die ?

WE keep going round in circules and the solocitors seem very reluctant to give a view on any of it really. WE have considered going to a tax advisor but are now nearing the 6 month deadline cos its all taken so long.

Would we be better to just pay the tax on it now and then its a done job. Can you borrow (from where) to pay iht?
Thanks any help appreciated.

Hi Barton 52,

I've just seen your other post. Because your mother can double up on the IHT threshold in the year she dies I think I would be tempted to let the whole estate pass to her. The longer she survives the higher her nil rate band will be and the greater the potential IHT saving.

That said, if your mother doesn't need the whole lot there's nothing preventing her making gifts to you. These are known as Potentially Exempt Transfers (PETs) and if she survives 7 years will drop out of her estate for IHT purposes.

If there is a likelihood that your mother may require long term care, then the Will can be varied to give her a `life interest` in the estate which will safeguard the capital from means testing.

If your solicitors cannot advise on this relatively straightforward matter you need to find someone who knows what they're talking about. Finding a solicitor that's a member of STEP would be a good starting point.

SeniorSam

John_Pierpoint wrote: »

No ulterior motive, it is just that my life is evolving.

To mis-quote Margaret Thatcher "we are a grandfather" for a week or two now.
So I need to understand all the options, not just for myself BUT so that I can explain things to the other people who might think they have a vested interest.

I might be jumping the gun, and expecting other family members to think along these lines:
My other child (daughter) will think "why is my brother's new kid getting this benefit?"
My wife might think "He will die at any moment, he has already out lived his father by 13 years; I could be left in penury?".
Etc.
Etc. for other family members.
At the back of my mind, I would like to do something like create an accumulation & maintenance trust (unfortunately now limited to age 18 by Gordon Brown's meddling) and the trust would help the parents to buy a home for the 3 of them - leaving the testosterone fuelled 18 year old to inherit a somewhat illiquid asset!

Any thoughts?

Hi John,

The A & M Trust may not be what yoiu are looking for but a far more simple 'Discretionary Trust' can be set up when making a gift in Trust for your grandchildren. This would be an Investment bond, managed by the Trustees, you and the childrens parent/s.

The Trust could be added to as funds become available and after 7 years from the date of each gift, the money would be out of your estate.

With this type of Trust the Trustees have the power to make gifts or draw from the Trust as required, for the benefit of the grand child, so for education, clothes, wedding, whatever. No Trust taxation as an investment bond only has growth not income. Alos not need for complex Trust accounts etc.

A good IFA would be able to arrange this for you and there should be no charges for the Trust as it is part and parcel of the investment. You could even do it yourself, but it would be beneficial to have an IFA to help monitor and advise on funds on a regular basis.

Hope this helps

Sam

John_Pierpoint

From my other posts, you may realise that I am still within the 2 years that allow me to pass on an inheritance without endangering my IHT nil rate band and having to wait 7 years.;)

localhero

John_Pierpoint wrote:

I may have "circumstances";)

I am in the process of inheriting a 6 figure sum from someone who died about a year ago. So far I have received nothing from the estate.

If I were to ask that this inheritance (which is within the nil rate band) should be set up as a trust for my grand-child/children ( until they are of "age") are there any pit falls I should be aware of ?

Presumably my wife and I would retain our individual allowances and rights to transfer unused nil rate IHT bands to each other (plus any other methods with loans allowing us to live like royalty and die like paupers? (I wish:rolleyes:)).

It might be worth putting in less than the current nil rate band and also allowing a bit of room for the assets to `sweat`.

If you can keep the assets beneath the nil rate band then you will avoid 10 year/exit charges.

Also, take into account the fact the Chancellor has frozen the IHT threshold next year despite an earlier pledge to increase it to [FONT=&quot]£[/FONT]350,000.

SeniorSam

localhero wrote: »

It might be worth putting in less than the current nil rate band and also allowing a bit of room for the assets to `sweat`.

If you can keep the assets beneath the nil rate band then you will avoid 10 year/exit charges.

Also, take into account the fact the Chancellor has frozen the IHT threshold next year despite an earlier pledge to increase it to [FONT=&quot]£[/FONT]350,000.

Better still,

Use more than one discretionary trust - say 200k in each. Costs no more to do this, different beneficiaries can be initially nominated and it makes it easier when the Trust is disolved or is assigned!

Sam

P.S. Getting a little fed up with this site when the threads are so long. About time this one was shelved and a new IHT one started - it would make it far easier to find the latest answers as they seem to be jumbled up - unless I am not searching correctly!

Sam

yelf

this thread should only refer to the article. any individual questions should have their own thread to stop such a mess

localhero

SeniorSam wrote:

Better still,

Use more than one discretionary trust - say 200k in each. Costs no more to do this, different beneficiaries can be initially nominated and it makes it easier when the Trust is disolved or is assigned!

Be careful - ordinarily if two trusts are created within 7 years of each other, then 20% IHT would be immediately due on anything that exceeds the nil rate band - in this case a liability of [FONT=&quot]£[/FONT]15k on [FONT=&quot]£[/FONT]75K.

Though in JP's case he may of course consider executing a DOV for the first trust.

John_Pierpoint

Don't think I can afford to put 600K plus into trust:rotfl:
Thanks for all the ideas.

oneskintdad

Hi...wonder if anyone can sort the bones from this??My auntie[dads sister] has just past away and i believe the term is died intestate[without making a will]..nospouse or children so my father is next in line to become administor as i understand?leaving in the region of £325k plus a very run down house ive become sickened after reading that iht could take 40% of this...APPALING..Any help or advice would be greatly appreciated although after spending nearly a day reading up on this im now convinced i need to consult a leach....sorry a solicitor...Dad is 75 himself and all this is hard enough..HELP..

SeniorSam

John_Pierpoint wrote: »

Don't think I can afford to put 600K plus into trust:rotfl:
Thanks for all the ideas.

Hi John,

you obviously do not understand how certain Trusts work and several can be set up WITHOUT incuring a tax liability provided the whole amount does not exceed the NRB.

You do need to speak with a specialist IFA as you have been asking lots of questions for a long time and are still in the dark.

You are also getting some poor answers from some who do not actually know what they are talking about!

I hope that the New Year will bring you happiness and knowledge.

Sam