making a will and IHT avoidance advice please!

mrs_baggins

Hi all, well I am not quite 50 but almost and a recent health scare has got me thinking about wills. For the record I own my own house and am divorced. I have 3 children none of who live at home. My house and assets are worth more than the current IHT threshold.

as i have no spouse what I want to do is to divide any assets up between them but to avoid them paying any IHT if that is possible.

I contacted a few solicitors who all wanted at least £700 to do this which I think is a bit steep but if thats what it takes then I shall have to pay. I dont know that much about IHT to be honest and am hoping that one of you may be able to tell me if what I want is possible. I know that I can give away 3k to each child per tax year but as all my money is tied up I actually dont have the cash (and in any case they will just squander it on god knows what! )

hopefully I shall be about for years yet but having had a scare (albeit unfounded) it makes you think about what would happen if you died suddenly.

CLAPTON

As you've posted on two forums I'll just correct the above bit about being able to give 3k to each of your children without potential IHT.

The rule is you can give 3k per year in total and not per person.. in addition you can give any number of 250 to different individuals.

so if you have 3 children you could only give each one £1k (i.e. 3k in total ) per year without potential IHT.
If you have say 10 grandchildren / nieces etc then you could give each one 250 per annum.
but you couldn't give each of your children 1000+250 each per year.

And of course whether they are your children or not makes no difference, the rules are the same except upon their marriage where more generous rules aplly.

margaretclare

Remember that IHT only applies over the £300,000 mark, anything under that is IHT-free. So what is your problem exactly?

To go to a professional and get a proper job done does actually cost money. Last week we paid £160 + VAT to get our EPAs done properly and professionally.

I am always amazed by people who say that they have this sort of money, £300K plus, and yet quibble at the cost of getting a professional to do a proper watertight job.

Margaret

Biggles

margaretclare wrote: »

I am always amazed by people who say that they have this sort of money, £300K plus, and yet quibble at the cost of getting a professional to do a proper watertight job.

To be fair, having a home and assets invested isn't always the same as having 'this sort of money'. And the OP did say she was prepared to pay if that's what it took, but I think she's right to check out her options first.

peggydoodaa

It does amaze me when people are unsure about paying ~£700 to save ~£120,000!

margaretclare

I've just picked up on the OP's comment about (a) all her money is tied up so she doesn't have the cash and (b) they (the young people) will probably squander it anyway.

So why bother? Why take the trouble to leave them a penny-piece? Why worry about whatever tax they might have to pay? Enjoy it yourself - as you say, you've had a health scare. Life is short, and there are some things that are just not worth worrying about.

Margaret

EdInvestor

mrs_baggins wrote: »

I have 3 children none of who live at home. My house and assets are worth more than the current IHT threshold.

How much more? What are assets made up of? They might be protected already, depending on what they are invested in.

IHT is charged at 40% on the amount over 300k, so if your estate was worth 400k, IHT would be 40k, still leaving 120k in inheritance per child.

Gifts to charity are IHT free, so another way round the matter might be 100k to each kid and 100k to a selection of charities of your choice. That way the taxman gets nothing.

localhero

Hi, Mrs Baggins,

You are in a common situation by being the sole owner of a property greater than the nil rate band threshold of £300,000. There is no easy option to avoid inheritance tax in that situation.

When calculating IHT, it will be based on the total value of your property and savings less any debts such mortgage. You could therefore buy a cheaper property and make gifts/use your allowances to reduce the value of your estate. You could also borrow against the home and spend it/give it away. You could also give the maximum to your kids and give the balance to charity.

I think you're justified in questioning the £700 quoted by a solicitor. There are also some complicated schemes around peddled by IFAs. I'm afraid there's no easy solutions and it depends on how hell-bent you are in saving your children money, but sometimes the only practical solution is to accept there will be some tax to pay by your family.

Biggles

peggydoodaa wrote: »

It does amaze me when people are unsure about paying ~£700 to save ~£120,000!

Why? £700 is a lot of money and even if there was IHT-saving involved (it's unclear whether there would be, it seems like a high price for a simple will, and IHT may well still be payable) it wouldn't actually save Mrs Baggins a penny. Her heirs, maybe. One day.....

mrs_baggins

As I think I may have stated in my first post the house I live in at the moment is worth more than the threshold- its about 350k- and I have various peps,bomds from a few years ago that are probably worth in total 90k.

I have said that I dont mind paying £700 if thats what ot takes but from what I can see as a single person there is not a lot that solicitirs can do anyway so I may as well just get a simple will sorted for a lesser cost and the ouitcome will be the same- 40% to be paid over the threshold unless I am missing something. I do realise that its important to draw a will up properly and in the case of couple its mirror wills which are drawn up which maybe take more planning but there must be loads of un married people out there whose estates are worth more than the current threshold because of the rise in house prices and I just wanted to know if there was something I was missing.

I could spend it all and live life to the max now but I want to help my children out as best as I can

margaretclare

mrs_baggins wrote: »

I could spend it all and live life to the max now but I want to help my children out as best as I can

Why should you? When you wrote in your first post 'They will probably squander it all on God knows what?'

Isn't there somewhere on the surface of this planet that you've longed to see? Friends, relatives in far-flung places - a flight to Brisbane via Singapore for example? I am the last person to say 'spend it on a cruise' because cruising is not everybody's cuppa. But there are lovely places out there and if your health worsens you are gonna regret this.

You don't have to spend it all. We're still saving and investing because we don't know what the future holds and what we may need, but we also enjoy life (were supposed to be at Niagara now except that I had a fractured pelvis). You sound as if you have enough income and assets to see you through for a long time to come - enjoy some of it! Believe me, there will come a time when you regret it if you don't. I've seen it a lot.

Margaret

PS: I've just had another thought. The scenario you're envisaging - you dying and children paying tax on your assets - may be a loooooong way in the future. Like, another 50 years! I know what I'm talking about. Like you, I had a 'health scare' in 1989 when I was 53. In a few days' time I'll be 72 and am still going strong.