Inheritance Tax

EdInvestor

A simple way of looking at it might be this:

Of the 400k estate remaining after purchasing the care plan,300k can be completely ignored as it can be given to heirs after her death IHT free as it is within the nil rate band.

That leaves 100k which would be liable for IHT.

Assuming this 100k is invested, she can

a)give away 3k a year of it as an IHT free gift
b)give away other bits and pieces IHT free, total around 1k
c) give away the income from the 100k, say 5k IHT free

That's a total of nearly 10k a year that can be given away completely IHT free.

She can also give away all the income from the other 300k (say 15k pa) if it wouldn't reduce her lifestyle.So that's up to 25k a year. If she doesnt do this and doesn't spend the income, this will increase her problem as the amount will grow above the nil rate band and become liable for IHT.[Note that her money should be invested for income so she can give it away not for growth, which would increase the capital, which she can't give away and which would then be subject to IHT].

After that, any gifts given will be subject to the 7 year rule.

The IHT nil rate band threshold rises every year, so if she gently runs down that 100k, eventually the band will rise to meet the remaining capital so that no IHT is payable at all.

A further point is how much the beneficiaries can sensibly absorb. Throwing big lump sums at people may be less useful in the long run than regular decent-sized chunks which can encourage good planning.

Noebys

Thanks both Clapton and EdInvestor

You have both given me losts to discuss with her, and I am with this information she will be able to have her wish in some form or other.

Once again, grateful thanks

cheerfulcat

Noebys wrote: »

Hi Clapton

Thanks for the reply. The amount my Aunt wants to give away has not been discussed. Her attitude is that she does not need any money any more and wants her relations, charities and friends to benefit now.

Any gifts to charities will be exempt from IHT.

scottp_2

as cheerfulcat has said, any gifts made to charity are not subject to IHT. If she has some charities she wants to give to, it may be worth donating a significant amount to reduce the capital liable for the tax.

Thanks!

Fairwinds

scottp wrote: »

as cheerfulcat has said, any gifts made to charity are not subject to IHT. If she has some charities she wants to give to, it may be worth donating a significant amount to reduce the capital liable for the tax.

Thanks!

or political parties (wonder who made that rule up)