Person dying....How to pay least tax?

cedejah

I am asking this Q on behalf of someone I know who is unfortunately and sadly dying of cancer. As hopeful as we are, she is in a hospice and it appears that the end is imminent. Recently she has been trying to give money away and buy people silly things and finally she explained that she has worked all her life and has around £100k in cash (plus other assets that add up to over £350k) and she would rather buy people things and spend it frivolously than give 40% to the tax man in inheritance tax.

She has two children and 3 grandchildren and she has already transferred the maximum cash allowances to them.

I have two questions:
1. If that money is transferred off-shore into someone else's name so it can be held in trust for the children and grandchildren would it still be liable for the inheritance tax (because of death within 1 year)?
2. Any suggestions on what she can do with £100k so that her family will have to pay the least amount of tax on it.

purdyoaten

cedejah wrote: »

I am asking this Q on behalf of someone I know who is unfortunately and sadly dying of cancer. As hopeful as we are, she is in a hospice and it appears that the end is imminent. Recently she has been trying to give money away and buy people silly things and finally she explained that she has worked all her life and has around £100k in cash (plus other assets that add up to over £350k) and she would rather buy people things and spend it frivolously than give 40% to the tax man in inheritance tax.

She has two children and 3 grandchildren and she has already transferred the maximum cash allowances to them.

I have two questions:
1. If that money is transferred off-shore into someone else's name so it can be held in trust for the children and grandchildren would it still be liable for the inheritance tax (because of death within 1 year)?
2. Any suggestions on what she can do with £100k so that her family will have to pay the least amount of tax on it.

Is she a widow? If so, when did her husband die and what was the value of his estate?

getmore4less

its too late to do much.
(gifts/disposals go back 7 years)

any spouse around/dead.

any debts.

is there a will.

CLAPTON

cedejah wrote: »

I am asking this Q on behalf of someone I know who is unfortunately and sadly dying of cancer. As hopeful as we are, she is in a hospice and it appears that the end is imminent. Recently she has been trying to give money away and buy people silly things and finally she explained that she has worked all her life and has around £100k in cash (plus other assets that add up to over £350k) and she would rather buy people things and spend it frivolously than give 40% to the tax man in inheritance tax.

She has two children and 3 grandchildren and she has already transferred the maximum cash allowances to them.

I have two questions:
1. If that money is transferred off-shore into someone else's name so it can be held in trust for the children and grandchildren would it still be liable for the inheritance tax (because of death within 1 year)?
2. Any suggestions on what she can do with £100k so that her family will have to pay the least amount of tax on it.

the IHT allowance is 325,000

however, if her husband is dead and left all his asset to her, then her estate will benefit from his allowance so her estate will have an IHT allowance of 650,000

so more details would be good.

cedejah

purdyoaten wrote: »

Is she a widow? If so, when did her husband die and what was the value of his estate?

Thanks for the prompt replies. She is not a widow. She is still with her husband and she has no debts whatsoever.

purdyoaten

cedejah wrote: »

Thanks for the prompt replies. She is not a widow. She is still with her husband and she has no debts whatsoever.

I fear that she may have been frittering away money needlessly. Is there a will and/or is everything to go to her husband?

Spouse or civil partner exemption. Your estate usually doesn't owe Inheritance Tax on anything you leave to a spouse or civil partner who has their permanent home in the UK - nor on gifts you make to them in your lifetime - even if the amount is over the threshold.

cedejah

purdyoaten wrote: »

I fear that she may have been frittering away money needlessly. Is there a will and/or is everything to go to her husband?

I assume she has a will and all the assets will go to the husband and kids I believe. It's just the cash that she has been wanting to spend. I am not 100% but I believe that it was her lawyer that told her it will be subject to 40% tax.

What makes you say she may be frittering away money needlessly? What should she do to protect it from tax?

CLAPTON

cedejah wrote: »

I assume she has a will and all the assets will go to the husband and kids I believe. It's just the cash that she has been wanting to spend. I am not 100% but I believe that it was her lawyer that told her it will be subject to 40% tax.

What makes you say she may be frittering away money needlessly? What should she do to protect it from tax?

if she leaves everything to her husband then there is no tax .

cedejah

CLAPTON wrote: »

if she leaves everything to her husband then there is no tax .

But if she leaves things to her kids then she will have to pay tax?

purdyoaten

cedejah wrote: »

I assume she has a will and all the assets will go to the husband and kids I believe. It's just the cash that she has been wanting to spend. I am not 100% but I believe that it was her lawyer that told her it will be subject to 40% tax.

What makes you say she may be frittering away money needlessly? What should she do to protect it from tax?

As Clapton says and with reference to my quotation above - the part of the estate which goes to her husband DOES NOT COUNT, regardless of the size. The husband's estate, upon his death, will account for that.

A will is important, providing she remains of sound mind as the rules of intestacy are complicated and her wishes may not be honoured- but I would not use that lawyer

CLAPTON

cedejah wrote: »

But if she leaves things to her kids then she will have to pay tax?

transfers between spouses are tax free

she can give up to 325,000 to her children (or anyone else ) tax free and the rest to her husband tax free

this may not be the best tax arrangement in the long term