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

peterpeter24

Hi Daniel 54

thanks for the advice..
Sorry to sound thick here- but when you say CGT is due on disposal- do you mean on the day she gifts property to us, OR when we choose to sell?


As an aside, what do you guys think about the Pension option-

"Pass on your pension

Under recent pension reforms, pensions can be left to anyone you please not just a spouse. This means they can be used as a beneficial tax planning vehicle.

The money is passed on tax-free from a pension if you die before age 75 and if you die after the beneficiary pays a death tax at 45% until April 2016 and after that the rules change again and they pay tax at their income tax rate. If, for example, you passed your pension on to grandchildren who aren't working and they take less than £10,000 a year from the pension, they would have no tax to pay."

surely this is quite a game changer?

Keep_pedalling

Your mother would pay CGT when she despises of it even if she gives it away. You may also have to pay it when you sell it if it's value has increased signifently from the time it was gifted.

As for pensions, what sort of pension are we talking about?

Daniel54

peterpeter24 wrote: »

thanks for the advice..
Sorry to sound thick here- but when you say CGT is due on disposal- do you mean on the day she gifts property to us, OR when we choose to sell?


As an aside, what do you guys think about the Pension option-

CGT becomes due when your mother disposes of the property,which includes if she gifts to you.

You can only contribute to a pension out of earned income ( rental income is unearned income and therefore not eligible.) and only up to the age of 75 ( and a maximum per year of £40k). If you have no earned income,the maximum you can put in in any year is £2,880

The new rules do make pensions attractive as part of estate planning,but it would seem unlikely that this would be of any help to your mother from what you have said so far

euronorris

If your Mother is very keen to reduce IHT, then she really needs specialist advice.


Yes, it will cost money, but if done correctly would save a great deal more in IHT when the time comes.


The saving, of course, would be for her heirs, not herself. So, does your Mother actually want to do any IHT planning?

Mojisola

peterpeter24 wrote: »

Main property my mother lives in worth approx £500k
three Rental properties in London worth approx £2.75m
(one is £1.2m / one £750k/ one £950k)

Parents worked very hard for years to build this portfolio

And may have benefited a bit from the rise in London prices!

ALBZ

I would like to know if anyone has managed to set up successful inheritance tax plans for properties worth over 1m. My parents own a home, in the region of about 1.6m. They are elderly and want to pass this onto us as 3 children. We are aware if the worse was to happen, we would be subject to the 40% meaning the property would most likely need to be sold to cover this amount, as none of us would have that type of capital available for the taxman. The property is a family home, lots of memories, and ideally, we'd love to keep this in the family as a base. I have spoken with people tax accountants and wills, trusts, and probate solicitors, and they are of the view that there’s not much we can do other then sell, or pay the 40% - impossible as you know! I am aware that there are trusts, but also that if within 7 years anything was to happen to our loved ones, we'd have to pay the 40% plus anything we paid to initially set up the trust (I’m told between 3-5k). We are also aware there may be ways of gifting portions of the property, but this seems complex and would be a minefield to try and explain to two elderly parents, already worried and rightly so, more concerned with their general day to day health.

I am aware of an option were the property could be sold to us (3 children), and then our parents would have to pay us rent (at current market rate) to prove this was a legitimate sell when the taxman comes sniffing. If the home was divided up and made into flats, they would only need to live in the lower section of the home, meaning less rent payable. We would then maybe look to rent the rest of the property. Can I ask, has anyone had any experience of this? and are there any pitfalls?

I’m also generally intrigued to know if anyone has any good advice on the matter as I really don’t want to be that person that looks back and says, OMG! I should’ve asked, such and such and have paid a whopping 500k plus and more importantly lose a home that has been the heart of my family for decades.

Keep_pedalling

If the house is so presious to you, how could you and your parents bare to turn it Ito flats? Also as there are 3 of you what is the point of having ownership if none of you can live there. In all likelihood at least one of you will want their inheritance in full so forcing a sale at some point in the future, even if you don't need to do it to pay IHT.

You don't mention any other assets they have but bearing in mind the value of the estate based on the house alone the best way forward is to take some professional paid for advice.

SeniorSam

Professional advice is always best, but possibly in order to help, what are the ages of your parents and what assets other than the house do they have? Also, have they made any gifts in the last 7 years? You mention that your elderly parents may not understand explanations about inheritance tax planning, but if any action is to be taken, it must be with their agreement and understanding otherwise any professional could not take instructions.
Sam

cjewsbury

Hi - does anyone know if you do a deed of variation does this impact the deceased nil rate tax relief ? Our solicitor has not mentioned this but someone else did the other day and we cannot find any information on the internet around this. The suggestion is that the nil rate 325k reduces depending on how much the deed of variation is for. Any help on this would be great. thanks

Savvy_Sue

Surely it depends on the terms of the Deed? I don't think the £325k changes, but ...

for example, if Dad pre-deceases Mum and in the terms of his will leaves very little to Mum and most to their offspring, a Deed leaving it all to Mum would, I believe, reduce the IHT due to zero.

This gives Mum a chance to do some serious IHT planning.

Likewise if the Deed makes bequests to charities, that would reduce the IHT due.

But I'm no expert ...