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

Mojisola

kizzaplough wrote: »

Thanks for your thought and opinions, looking at my father view point what do you think would be the best way to leave his estate to us.

He should get professional advice about his estate - investigate what tax planning he can do to reduce IHT (if that's what he wants) and then leave his children a free-and-clear inheritance so that they can manage the money as suits them best.

Keep_pedalling

Mojisola wrote: »

He should get professional advice about his estate - investigate what tax planning he can do to reduce IHT (if that's what he wants) and then leave his children a free-and-clear inheritance so that they can manage the money as suits them best.

Agree, although if all his estate is tied up in property then CGT comes in to play if he wants to make some of his estate potentially exempt by gifting some of it now.

Mojisola

Keep_pedalling wrote: »

Agree, although if all his estate is tied up in property then CGT comes in to play if he wants to make some of his estate potentially exempt by gifting some of it now.

That's why it needs a professional who can compare different options and show kizzaplough's father how much each would cost.

SeniorSam

cjewsbury, the changing of a person's Will by Deed of Variation has no impact on the nil rate band allowance that we all have. Many people wish to take advantage of both nil rate band allowances, by passing their estate to their spouse on death and when the spouse dies, the two allowances are offset against the overall value of the estate. The nil rate band allowance of the first to die can still be used if that person elects to set up a Trust to hold his estate or part of it. Trusts can enable the protection of a deceased persons estate against the possibility of the surviving spouse re-marrying and maybe loosing all the estate to another person. Offten children can then be disadvantaged. Professional advice is important and you should seek help regarding this

Sam

SeniorSam

kizzaplough .... TRusts can be very helpful iuf managed correctly. Where mambers of the family are the Trustees, then arrangements could be made for loans or gifts to be made from the Trust with agreement of all Trustees. Many very wealthy families have had their estate fortune within Trusts for many years, but the right sort of Trust is important and the right sort of investments to minimise taxation of the Trust. Professional advice should be sought.

Sam

Londonwelsh

Hello,

I have searched this thread and online, but I don't seem to be able to find an answer to this particular question. I am a first time buyer (and only child) and my parents are planning to help me buy by giving me any inheritance I would have received upon their death as a cash gift towards my deposit. It is a fairly significant amount £100,000, I am very grateful and would never have been able to buy in London without their help.

My question is: the money is currently in a joint account in both my parents names, if only one of my parents were to die within the 7 year window would I have to pay inheritance tax? Or would they both have to pass away for this to come into effect? This could be potentially problematic to pay as the money would be tied up within a property.

Any advice greatly appreciated,
Thank you interweb world!

Savvy_Sue

Quick answer: whatever goes from one spouse to the other is free of IHT. So if it's only the £100,000 NOT going to the spouse, then it only becomes a question on the second death. And at that point, presumably the house can be sold to meet any IHT due?

So maybe the first question you have to ask is, what would the value of your parents' estate be (total and halved for the first death would be useful), and what do the terms of their will say?

But you do also have to encourage your parents to consider the possibility that either or both might need residential care, in which case that £100,000 might prove useful in paying for the best ... so what will they have left?

'Proper' (ie paid for) specialist advice may be useful if there is definitely going to be IHT due on the second death.

xylophone

Re IHT see http://www.which.co.uk/money/tax/guides/inheritance-tax-explained/inheritance-tax-planning-and-tax-free-gifts/

https://www.gov.uk/inheritance-tax/gifts

https://www.gov.uk/inheritance-tax

https://www.gov.uk/government/publications/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band

[Deleted User]

I have 3 grown up children, all in their 40s and with mortgages and finding life hard, as is usual at that age. I am widowed and age 68. I have savings, a good sipp, which I manage myself and have done since 2006. It is increasing in value via share trading. I haven`t drawn from my sipp in a year and it was my husbands, transferred to me, tax free. My children are my sipp beneficiaries. My health is very good. I have my own mortgage-free home and was widowed 17 months ago

I have more than enough income and want to transfer some money to the children. Can I transfer, via standing order, £250 pm to each of the children, as small gifts, to continue as long as I am comfortable with that amount leaving? I would rather do that than withdraw cash lump sums for them from my sipp as I am aware of the possibility of funding care later in life

I also have a fixed rate savings bond maturing in august. It was my husbands and is now worth £57k. Can I also give each child £15k, as well as the £250 pm? I would still have enough savings to allow a good safety net. I am aware of the 7 year rule

xylophone

You are in good health, have a mortgage free property and substantial savings and income. You are also relatively young.

In such circumstances, it seems to me that there is little concern over "deprivation of capital" and making gifts with a view to reducing any IHT due on your estate very reasonable.

With regard to regular gifts out of income, see

http://www.pruadviser.co.uk/content/knowledge/oracle_archive/oracle-technical/oracle-tech-january-15/normal-expenditure-out-of-income-expenditure-new/

https://www.gov.uk/inheritance-tax/gifts

It seems to me that in your circumstances, you could also make the gift from capital that you propose.

With regard to IHT in general, you have a personal allowance, any unused spouse allowance and the potential of the upcoming family home allowance.

http://www.rossmartin.co.uk/private-client-a-estate-planning/inheritance-tax-probate/666-iht-transferable-nil-rate-band-records

https://www.gov.uk/government/publications/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band

Presumably you have an up to date will - if you need additional advice in respect of estate planning your solicitor should advise.