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

Keep_pedalling

SeniorSam wrote: »

Keep pedalling I hope that the life policies you have taken out have been written in Trust to the children.

Sam

Yes they are.

SeniorSam

As already said by others, make the gifts individually, ideally by individual cheques from your joint account but signed individually. Keep a spreadsheet of all gifts, listing amounts and dates. Each make annual gifts of £3,000 and if not done previously, carry forward one years, so immecuiately £6000 is exempt for each of you. Gifts will be treated individually then and on death before the 7 years, that gift will eventually be subject top taxation, but only when the second death has occured. It is therefore essential that you document everything so that your executors (preferably family and not professionals) can easily deal with these matters.

What is your age now? If your health is good, you may wish to consider a lif polict for 7 years for the amount that may be payable for the tax and not the amount of the gift. They are decreasing policies and not so very expensive.

Hope this all helps

Sam

Ben_Patient

Hello everyone,

This seems like a great thread. I would welcome some advice please: unmarried couple with wills and a number of properties.

Current situation
My partner and I are not married. We are in early 40's and not in any IHT-exempted professions.
We own 3 properties outright (of which one is our primary abode).
The properties are "joint tenancy" so we each own 100% of each property.
The properties are each worth circa £500K. So total assets of £1.5m.
Savings/debts are negligible.
We have wills in place that leave everything to each other.

Questions
1. I am not quite sure how the calculations are worked out, but it seems to me that, if one of us dies, the other will have to pay IHT on the whole estate (because of the joint tenancy) and that the IHT threshold is £325K (or whatever it is/will be), so the bill could be 40% of £1.5m minus £325K). Is that right?

2. What is the most efficient way of setting things up for us and how does that change the above? e.g.
- Should we get married?
- Should we change the tenancies to give a 50% split?

We are quite happy to get married to minimise IHT. The legal status is meaningless to us.

We sought advice when getting our wills sorted out, but that was when the total value of our estate was less.

I would really appreciate some advice on this, and how best to go about sorting it out.

Many thanks
B

SeniorSam

As you are not married, when the first one dies, their estate will have to pay an inheritance tax before the estate can be distributed and not when the second one dies. This would be the case if you were married. Therefore 'married' would allow the tax to be deferred.

If you get a solicitor to draw up Wills, make sure it is a STEP qualified solicitor.

If you have children, then you need to consider what happens on the second death if you wish to preserve the estate.

Sam

Savvy_Sue

Also note that if you marry, your current wills will become invalid. That may not matter, but if you don't like what the laws of intestacy say then as part of your marriage preparation make new wills, 'in contemplation of marriage' - that way they'll stay valid afterwards!

POPPYOSCAR

Get married.


Cost us less than £120 took about 30 mins one sat morning with 2 witnesses(our two children).


We do not feel any different, do not feel 'married'.


Only did it for the IHT.

Keep_pedalling

POPPYOSCAR wrote: »

Only did it for the IHT.

You old romantic

POPPYOSCAR

Keep_pedalling wrote: »

You old romantic

Not much romance about not being able to stay in your own home if the other one dies!

arfy2007

Hi all great thread!

Basically my father passed away 6 months ago. He was joint owners with mum on their property and their savings so everything went in her name with no tax owed as they were married.

The house is worth £560,000 on current market and she has savings of around £180,000. On my reading I assume on her death, her and dads inheritance tax allowance (£325k+£325k as dads allowance wasn't used) would be £650k?

Mum is 60 and in good health so god willing she will make it to 2020 where the allowance is £500k plus dads. If my reading was right would myself and my two brothers pay no inheritance tax on her estate if we just leave everything as it is and let the inheritance tax threshold increase over the next few years?

Or do you think it would be wise to make provisions now? Currently I live with mum and pay half the bills so a gift of half the property would be an option but only if necessary. On her death we would split the property and estate between all my brothers.

Keep_pedalling

There is no point in making large gifts now, as they will remain in your mums estate for tax purposes for 7 years, by which time the main residence allowance will have taken all IHT liability out of the estate. Also doing that may create problems with your siblings.

She could cover the short term risk of an unexpected early death with an insurance policy (held in trust to avoid any pay out adding to the estate)