New Inheritance Tax threshold for couples

peter999

Pam17 wrote: »

Alistair Darling says he will raise it to £600,000 for couples.

Talk about opportunism & stealing other parties policies.

Seeing how the Tories proposals on inheritance tax gave them a massive boost in recent polls, these parties have suddenly realised how important this issue is.

It defies belief that the Tories have taken 10 years to think this up, what idiots.

It sickens me how Labour can suddenly jump ship, pull this out of a hat to match the Tories' policy & it's all Gordon Brown's fault from his taxation policies over last 10 years.

They are slimeballs.

peter999

localhero

Hi Chris2fer,

If a married couple each leave their share of the property to their children A & B, but allow surviving spouse a right to remain in the property, then most or all of the entire property is secured against care home fees if surviving spouse requires care.

Secondly the property given to A & B is safeguarded against surviving spouse remarrying, having more children, gambling it away etc.

But for IHT purposes, the surviving spouse will have what's called an interest in possession or life interest which will form part of their estate for IHT purposes.

chris2fer

Thanks for the reply localhero

Could i also ask, Do you think it is the right time to set up a life interest trust or should we wait a couple of months till the dust settles ??

localhero

If you've already got a discretionary trust will in place I would say hold on. If not then I would probably go with the life interest trust.

The legislation is (rather surprisingly) very clear and according to well placed sources was formulated for the 2006 budget (and not in a few days in response to the Tories as per popular belief) but Gordon Brown decided to keep it back for a pre-election announcement.

Because of the above, I think it's unlikely to change and so my personal view would be to proceed.

DavidLaGuardia

localhero wrote: »

Here's my post from another IHT thread:

Having considered the matter carefully I have reached the following conclusions:-

For those people who have considered/set in motion NRBDT Wills, put your plans on hold. In most cases they won't be appropriate.

The Nil rate band discretionary trust is still suitable in some situations (unmarried couples and those with business assets to name a couple of examples).

Since it is not tax efficient to make gifts upon first death, the easy option is to leave the whole estate to spouse so they receive 2 x the prevailing tax allowance when they die. So if they die in 2010 they can leave £700,000. (What most couples have traditionally done with their Wills in any case.)

I have also given some thought to this and would like to challenge this (please feel free to point out any errors or omissions)

Fact 1:
IF the full nil rate band is carried over for the spouse, then the rise in the nil rate ban is effectively kept out of any future charge. Any appreciation in asset value in excess of this amount is potentially taxable at 40% IHT.

Fact 2:
IF the nil rate band is used on the first death, the the FULL appreciation in the asset value will be potnetially taxable at 18% CGT.

Take assets worth £350,000 in 2010
Let us assume an over rise in the allowance over 10 years equialent tio 3% p.a.
(The rise to 350,000 in 2010 represents an above inflation rise of 5.27%p.a. from 2007. However, tax allowances are generally not increased much beyond inflation.)
NRB in 2020 = £470,370

Rise in asset value = 5%p.a.
Value in 2020 = £570,113.

40% IHT = 40% x (570,113 - 470,370) = £39,897

18% CGT = 18% x (570,113 - 350000) = £39,620

OK that seems pretty similar, but then conisider the ways of avoiding myuch of this CGT. Even if one does not have any losses to use or carry forward, there are allowances and methods of deferring the tax to later years to fall within allowances.

In addition, ring fencing the nil rate band against other issues such as nursing home fees hase been mentioned.

Also, if the surviving spouse remarries, there is unlikely to be a tripple allowance. In such cicumstances, using the nil rate band on first death is clearly beneficial.

In fact [now here's a Machiavellian idea] a widow or widower whose deceased spouse has used their NRB is best advised to find a poor person who is much older/likely to die soon and marry them to pick up on the double allowance again. It would even be worth paying the individual a fee or the tax dodge.

DavidLaGuardia

In fact [now here's a Machiavellian idea] a widow or widower whose deceased spouse has used their NRB is best advised to find a poor person who is much older/likely to die soon and marry them to pick up on the double allowance again. It would even be worth paying the individual a fee or the tax dodge.

peter999

localhero wrote: »

...and according to well placed sources was formulated for the 2006 budget (and not in a few days in response to the Tories as per popular belief) but Gordon Brown decided to keep it back for a pre-election announcement.

I'll go with what is publicly announced.

Gordon Brown had 10 years to make this announcement & the major policy change was smoked out by the Tories.

Brown could have kept dithering forever.

Remember the following, just earlier this year.

This sums up the attitude of Brown & Labour's previous pathetic changes to Inheritance Tax, to keep raking the money in.

Revenue closes inheritance tax loophole
http://money.uk.msn.com/tax/articles/article.aspx?cp-documentid=4792024

"Up to 500,000 families could be hit with a mammoth tax bill after a tribunal ruled against a common way to shelter money against inheritance tax.
The nil-rate band discretionary will trust arrangement, used by many couples to limit inheritance tax liability after their deaths, has been called into question. The nil-rate discretionary trust procedure typically involves splitting the value of the home between husband and wife, so that both may fully utilise their respective IHT allowances of £300,000."

peter999

localhero

I'm sorry Davidlaguardia,

I don't follow what point your making at all, and where does CGT come into any of this?

RayWolfe

Peter999:
Are you sure you don't work for Central Office?

localhero

It sounds rather like it.

This is a forum to help people to save money, not an arena for political diatribe.