How far does executor need to look at money spent by the deceased in the last 7 years

securityguy

"But I benefited from a trust fund set up by my deceased grandfather about 40 years after he'd died."

The law around both IHT and, particularly, means-tested benefits have changed quite a bit in the last fifty years, you know.

Keep_pedalling

Sicard wrote: »

You must know what you're saying otherwise you wouldn't say it. But I benefited from a trust fund set up by my deceased grandfather about 40 years after he'd died.

Things have changed a great deal since your GFs daylight. Gifting whether outright or via a trust can indeed reduce IHT, but the 7 year rule makes either an unlikely solution to someone of her age and poor health

Our estate will pay some IHT, but we have reduced the amount that will likely need to be payed by gifting, and in case the worse happens and we don't survive 7 years, we have a second death insurance policy in place that covers any tax that applies to those gifts. We however are in our early 60s and in good health.

IHT planning does need to be started as early as possible for it to be effective, and the only way this lady can gaurantee avoiding IHT is to leave everything above her nil rate band to charity.

Yorkshireman99

Keep_pedalling wrote: »

Things have changed a great deal since your GFs daylight. Gifting whether outright or via a trust can indeed reduce IHT, but the 7 year rule makes either an unlikely solution to someone of her age and poor health

Our estate will pay some IHT, but we have reduced the amount that will likely need to be payed by gifting, and in case the worse happens and we don't survive 7 years, we have a second death insurance policy in place that covers any tax that applies to those gifts. We however are in our early 60s and in good health.

IHT planning does need to be started as early as possible for it to be effective, and the only way this lady can gaurantee avoiding IHT is to leave everything above her nil rate band to charity.

It is worth remembering that although the full saving takes seven years there are worthwhile savings from the start of the fourth year after the gift.

getmore4less

Yorkshireman99 wrote: »

It is worth remembering that although the full saving takes seven years there are worthwhile savings from the start of the fourth year after the gift.

Only on what most would consider VERY large gifts.

Taper relief does not kick in till the gifts are over the nil rate band.

getmore4less

Sicard wrote: »

You must know what you're saying otherwise you wouldn't say it. But I benefited from a trust fund set up by my deceased grandfather about 40 years after he'd died.

life interest(interest in possession) and other trusts were a lot more common.

Typically a spouse then children retain the use and benefits(income) of the assets and ultimately they go to the grandchildren.

The introduction of the transferable nil rate band eliminated the need for many of those trusts leaving the main reason for keeping them protection from care fees.

There is still room for trusts done properly the tax penalties are no as erroneous as many think.

Yorkshireman99

getmore4less wrote: »

Only on what most would consider VERY large gifts.

Taper relief does not kick in till the gifts are over the nil rate band.

It depends what you call a very large gift. If the estate is above the IHT threshold anything over the £3K annual gift limit potentially adds to the iHT bill. Any reduction in that has to be worthwhile. Those who downsize often have significant surplus funds subject to possible future care needs.

getmore4less

Yorkshireman99 wrote: »

It depends what you call a very large gift. If the estate is above the IHT threshold anything over the £3K annual gift limit potentially adds to the iHT bill. Any reduction in that has to be worthwhile. Those who downsize often have significant surplus funds subject to possible future care needs.

They may add to the total but don't benefit form taper relief unless large.

Total gifts under the nil rate band don't change the IHT bill.
Taper relief on the gifts kick in when the gifts exceed the nil rate band not the full estate.

The taper relief does not change what goes back into the estate it reduces the tax due on the portion of gifts over the nil rate band.

Keep_pedalling

Yorkshireman99 wrote: »

It depends what you call a very large gift. If the estate is above the IHT threshold anything over the £3K annual gift limit potentially adds to the iHT bill. Any reduction in that has to be worthwhile. Those who downsize often have significant surplus funds subject to possible future care needs.

Was that a typo, anything over the £3K limit potentially reduces the IHT bill, it can never increase it.

With the size of the estate we are talking about here, the majority of it would need to be given away to benefit from taper relief.

getmore4less

Keep_pedalling wrote: »

Was that a typo, anything over the £3K limit potentially reduces the IHT bill, it can never increase it.

With the size of the estate we are talking about here, the majority of it would need to be given away to benefit from taper relief.

What ym99 was probably trying to say was PETs get added back to the estate total.(any gift not exempt becomes a PET for 7 years).

Yorkshireman99

It was indeed a typo. Thanks for correcting me.