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

arfy2007

Thanks! So everything I assumed about leaving things be was right? I'll talk with my brothers n mum about the insurance policy but guess it will only be required for a couple of years at most.

Keep_pedalling

arfy2007 wrote: »

Thanks! So everything I assumed about leaving things be was right? I'll talk with my brothers n mum about the insurance policy but guess it will only be required for a couple of years at most.

Would also be a good time to make sure your mum (and you and your brothers come to that) have a properly drawn up will in place.

Savvy_Sue

That's properly drawn up wills which cover the eventuality of one of you pre-deceasing Mum ...

troubleinparadise

arfy2007 wrote: »

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.

You and your brothers would not pay inheritance tax on your mother's estate - any IHT owing would come from the estate, and the payment is made by the executor/s on behalf of the estate.

christine1540

hi i am writing this on behalf of my best friend cut a long story short her mum died 3years ago this april with instructions that the house was to be sold and half to go her stepdad and the other half to be split between her and her sister after 18mth he put the house on the market because he had to not by choice for £1.300,000 . they manged by way of a loan to pay the first lot of inheritance tax and see a solicitor to the tune of £2,500 who told what they neeed to do and send a letter to his solicitor but unfortunately the dont have ex amount of ££££ to take him to court to force the sale of the house or send any letter etc , as she am now unemployed and her sister works in a cafe and they have no assets to sell , they are now being taken to court by the tax man for £30,000 which they cant pay
there step dad has told them (your never see a penny while im alive i make sure you give it all to the tax man ) his words not theres although there are not aloud to go to the property they were told by the police (her sister had a row with him on the phone and called him a liar ) they really are at a out wits end this is making her and her sister ill they cant cope with this no more but they have hit a dead end which ever way they turn every thing costs ££££ which they dont have ,anybody know of any help they might be able to get thank you x

Savvy_Sue

Who were the executors of the estate?

lazza1973

1. I am single and have an Estate in £800-900k and even with the new Residence Allowance so £300-400k ‘possible’ for IHT in 2020.

2. I am looking to create a Discretionary Trust with ‘around £300k’ in it to; to avoid some Tax challenges which arise when we get over the £325k. So overall there will some of the Estate still subject to IHT but will be relatively small and I may yet address thorough the small gifts/weddings etc .

3. I have a solicitor who will create the Trust as ‘legal entity’ but I seem not to be clear on what it means to ‘manage ‘the trust. I had envisaged using a ‘trading platform’ e.g. Intelligent Investor; Halifax; Hargreaves Lansdown and creating a ‘trading account’ with the £300k of OEICS/shares in it. Then periodically with the Trustee, review and take action to keep below the £300k.

4.A problem –though I may have confused myself – is that I have ‘accounts' in my own right with these companies already and as such seem not able to create ‘another account ’

5. Would appreciate views of anyone who has done this – or similar – already on what I am doing wrong/got confused/using the wrong language or references to anywhere I get relevant advice.

SeniorSam

Hi Larry,

I am sure you will have many people offering guidance on this forum and it would be best to check out all the information you receive with professionals, even what I say.

Creating a Discretionary Trust will require at least two Trustees, one of which should be yourself, but will the other be a professional person such as solicitor or accountant, or a family member?

You need to gift the capital into the Trust for named beneficiaries, whop may, or may not be also Trustees. Mre importantly, if it is your intention to maintain control of the capital as if it was your own, you cannot do this?

Trusts act as an individual, have their own allownaces which are smaller than your own and get taxed on all income at a higher rates.

You seem to be wanting to set up a trading account within a Trust and may have difficulties with this. Don't think of it as just another account of yours, it's not designed for that and the Revenue are very strict on what is done in Trusts.

The Trust will also have to produce accounts each year and costs are probably going to be very high, particularly where professionals are concerned.

With an estate of £800-900k, gifting this amount to others may not be acceptable to the Revenue, so dont just trhink that TRusts are ways of retaining your money and getting it protected as well. That's not what they are supposed to be uised for.

Having retired 5 years ago, there may be new rules that I am unaware of, so wait for answers from others..

Good luck
Sam

lazza1973

Sam

Very helpful. Focusing on our response:

1.The Trust would be a gift of about £300k

2 There would be a Trustee who is a family member , I had considered I would be one as well . I am merely seeking to 'set it up' so they can control it. Perhaps incorrectly I had envisaged they would have 'trading account' and be able to add / sell/ at times over its lifetime.

I can see how I may be confusing things by trying to set up 'trading account' as mine because as you say - it should be 'the Trustees' with any withdrawals recorded as what the purpose is. I had assumed I could withdraw 'income' in small amounts when if and when the Trust approached £325k i.e. more than the original gift?.

SeniorSam

Hi Larry, I had the feeling that you were thinking that way, but Trusts are for gifting, not managing capital for you.

Have you enquired about taxation of Trusts, you should, as all income or growth will be looked at closely and will require the Trust to submit tax returns every year.

If you are not a Trustee then the other Trustees can do anything they wish, even to ignoring you. In fact the Trustees could be in serious trouble if they are influenced in any way by outsiders.

The Trustees have a legal obligation to the Trust and the beneficiaries can take legal action against Trustees if they act unwisely. Being a Trustee should not be entered into lightly or without knowing your legal position and obligations, so do read up on this more.

You cannot take an income from the Trust as you have 'gifted' it to others and it's not yours.

You may need to think again as you do not know sufficient to consider Trusts at present and the rules that have to be maintained.

I'm curious to know what the net value of your house is?

Sam