Opinion on IOU Clause

ferger

getmore4less wrote: »

The main reasons for the trust are ring fenced assets

They grow reduced tax liability(IHT tends to be more than CGT).
No claim for care fees from the assets.

The IOU bit just means there is a debt to the trust.

OK, now I get it - thanks. The references to pre- and post- 2007 treatment of the nil-rate band and transfer to surviving partner are factors in the motivation to do it, but aren't the whole reason per se...

getmore4less

There is another reason for using trust.

The max a survivor can increase their nil rate band is 100%.

This can result on the waste of nil rate bands when multiple deaths of spouses occur .

g6jns_2

What worries me is that AFAIK HMR&C can arbitarily change their minds at any time so that the scheme is nullified. The reason I say this is that the scheme is well known way of reducing liabilities. In fact I am amazed they have not closed the loophole already. Given what both major parties have sId about reducing loopholes it would be an obvious target after the election.

SeniorSam

I believe that you have understood this.

My main reason for wanting to retain this and use an IOU clause is that my wife can retain the assets to invest as she wishes and use as she wishes. The only proviso is that the debt of the first nil rate band is secured and payable from her estate when she dies and cannot be attacked by anything at all.

Yes, there may be less nil rate allowance than could be if the allowances keep increasing, but I would rather protect the first allowance by ring-fencing it completly and allow the various investments to use the same funds that have already been so good for the last few years. If those were put into the Trust, it may restrict the Trustees if they need to be far more conservative.

Nothing is set in stone and reviewing Wills is an essential part of the process of getting old. At 74 I am presently renewing our Wills and may have to do it again if legislation changes. I am prepared top do that periodically if necessary.

Sam

getmore4less

This is not really a loophole as long as you only ring fence one allowance which you could have given to anyone.

Forcing people to give assets to their spouse will not go down well.

getmore4less

Sometimes it is worth keeping it simple rather than IOU just stick the assets you have to have in the trust the non liquid ones are a good choice.

Let the survivor manage the liquid assets, much easer to cash in a few shares and spend/gift than a house.

SeniorSam

getmore4less wrote: »

This is not really a loophole as long as you only ring fence one allowance which you could have given to anyone.

Forcing people to give assets to their spouse will not go down well.

Can't see where the 'forcing' comes into it. This is what we have decided to do and I am just trying to show others that there is another way of looking at this area of planning.

Nobody has to do what they don't want to.

Sam

SeniorSam

getmore4less wrote: »

Sometimes it is worth keeping it simple rather than IOU just stick the assets you have to have in the trust the non liquid ones are a good choice.

Let the survivor manage the liquid assets, much easer to cash in a few shares and spend/gift than a house.

I would never use the house in the Trust as the complications and responsibilities are greater. Also the possibility of a move to other property just complicates matters for trustees.

Sam

getmore4less

SeniorSam wrote: »

Can't see where the 'forcing' comes into it. This is what we have decided to do and I am just trying to show others that there is another way of looking at this area of planning.

Nobody has to do what they don't want to.

Sam

Response was aimed at the loophole that g6 thinks it is.

SeniorSam

getmore4less

Ahhhhh .................... sorry.