CGT IHT Nursing home fees and gifting

patel007

Hiya
On my day off from work today I have managed to get myself worked up.
I have booked a free appt with an Independent FA for this Friday.

A bit about me and my wife: I will be 55 later this year and my wife will be 63, we have three adults children

We live in a mortgage-free home, valued at 450k
We bought a house in 2009 for rental and rented out, cost 200k now worth 420k
We bought another rental house in 2010 for 125k now worth 225k
Both rental properties bought with cash.

We have bank and PB saving between me and my wife close to 300k.

One of our children is married.

Please help re best way to mitigate CTG, IHT and any nursing home fees if we are unlucky.

We both 20% tax payers. We both have comapny and private pensions.

If we gifted a house to our married son, we are aware re 7 year tax rule but worried if they get divorced

Like I said we have booked an appt with IFA this Friday.

Can anyone help with all of my post, or some of it? Who is the best person to consult and approximately costs involved

Many thanks and sorry for the long post

xylophone

You are both only middle aged, presumably in good health (as you have not indicated otherwise) and have substantial assets which even with the "family home allowance" for IHT are likely to mean that some IHT will be due.

It would not be unreasonable for you and your spouse to try to mitigate the IHT bill by making gifts while you are alive.

You might each consider making cash gifts/regular gifts from income to your children.

There is little you can do about CGT if you gift real estate now.

With regard to care home fees, at your age, in good health and with such substantial assets, it seems to me that you have room to manoeuvre before Deprivation of Assets becomes a consideration.

http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS38_Treatment_of_property_in_the_means-test_for_permanent_care_home_provision_fcs.pdf?dtr%20%20k=true?dtrk=true

below is archived but still worth a look.

http://webarchive.nationalarchives.gov.uk/20060213211319/inlandrevenue.gov.uk/leaflets/iht2.pdf

patel007

Thank you.
We are aware re 'deprivation of assets' and recently read worrying stories re people gave assets away yrs ago when in good health but now being hounded by local gov.

is an IFA best person t consult?

Wayne_O_Mac

patel007 wrote: »

Please help re best way to mitigate CTG, IHT and any nursing home fees if we are unlucky.

It seems like you're trying to avoid having to pay nursing home fees should they be necessary. Given that you have substantial assets and savings, could you perhaps advise who you think should pay the fees instead of you?

le_loup

Wayne_O_Mac wrote: »

could you perhaps advise who you think should pay the fees instead of you?

I think he wants me to pay - but he seems a nice sort of fellow so I don't really mind.

Keep_pedalling

The problem with sticking nearly all you wealth in property is that it is not easy to avoid CGT as it is an all or nothing sale.

As home owners you will have a joint nil rate band of £1M by 2021 so you are not likely to have much of an IHT liability.

You could avoid CGT and free up some capital by selling your main home and moving into the more expensive of your other properties. That should free up plenty of cash to maker some IHT reducing gifts to your children. Add a second death life policy to back that up should you both die within 7 years.

Keep the other rental property as an insurance to pay for care should either of you need it, because quite frankly you would be bonkers to rely on LA funded care when you are in a position to easily afford much better for yourselves.

AnotherJoe

Keep_pedalling wrote: »

Keep the other rental property as an insurance to pay for care should either of you need it, because quite frankly you would be bonkers to rely on LA funded care when you are in a position to easily afford much better for yourselves.

This

Have you ever been in an LA funded care home ? The tax tail is wagging the comfortable old age dog and you have missed the bigger picture.

xylophone

As home owners you will have a joint nil rate band of £1M by 2021 so you are not likely to have much of an IHT liability.

Their joint assets are already in excess of £1M - the likelihood is that the three properties will increase in value in excess of inflation/IHT allowance.

The cash savings too, may well increase in value.

£450,000 +£420,000 +£225,000 + £300,000 = £1.395M.

xylophone

http://www.whentheygetolder.co.uk/care-fees-funding-and-deprivation-of-assets-the-rules/

may be worth a read.

Keep_pedalling

xylophone wrote: »

Their joint assets are already in excess of £1M - the likelihood is that the three properties will increase in value in excess of inflation/IHT allowance.

The cash savings too, may well increase in value.

£450,000 +£420,000 +£225,000 + £300,000 = £1.395M.

Whoops! I misread cash as £30k not £300k.

I would still look at offloading one property and gift a good chunk of that away though.

patel007

Thanks to those that have tried to genuinely help
So far, we are in good health, but why should those that have worked hard, invested sensibly as well as spent money have to pay tax, on tax on tax when those living in taxpayers funded homes pay a big fat zero for nursing homes, grants and usually as better off as those with one home and a private pension, EG hard working person/s worked hard-spent cash on private pensions so when they retire, they are no better off on income in many cases than those in tax payers homes and lots of benefits - the same homeowners then can't even give money to their loved ones when they have passed away as nursing home fees for those with assets have no limits. The tories promise a limit of 50k for working people in 2010 but never happened now talking re 100k

So, is there anyone that can tell me if IFA is the best way forward, please?
Thanks