Avoid IHT by Deed of Variation?

Yorkshireman99

The advice you have received IS correct. DOVs are not a magic bullet that many imagine it is. Given there is no spouse the only ways a DOV would help in your case is if this was used to benefit charity. What a DOV can be used for is to reduce potential for double IHT by passing assets to a younger generation rather than the next. Numerically most estates do escape IHT because of the spousal exemption and that many estates are way below the IHT threshold. It is also well to remember that there is an amazing amount of false advice circulating online. To be effective real IHT planning needs to take well before, at least seven years, death not afterwards.

euronorris

If there was a spouse, was there also children who may have pre-deceased them? If so, are there any grandchildren and are any of them beneficiaries? If so, the residential nil rate band will also come back into play and *potentially* take the total exemption up to £850,000.


Whilst there was a spouse, did that spouse use any of their nil rate band upon death, or was everything passed to the surviving spouse?


What do you mean by 'worked for'? I thought this was an inheritance? Or is it a business that is making up the majority of the estate value? If so, it *may* qualify for Business Property Relief. Depends on a lot of factors though.

Tom99

[FONT=Verdana, sans-serif]If you leave exactly 10% of the taxable estate to charity then the other beneficiaries will get 57.6p in the pound of the taxable estate rather than 60p if nothing was left to charity.

[/FONT] [FONT=Verdana, sans-serif]100-40%=60p

[/FONT] [FONT=Verdana, sans-serif](100-10)-36%=57.6p[/FONT]

Crabapple

Most estates don't pay IHT either because they are under the thresholds or saving advice is taken before death.

It's seen as an avoidable tax so if you can pay for suitable advice there are lots of legitimate options available.

Unfortunately after death those options do not exist.

Keep_pedalling

euronorris wrote: »

What do you mean by 'worked for'? I thought this was an inheritance? Or is it a business that is making up the majority of the estate value? If so, it *may* qualify for Business Property Relief. Depends on a lot of factors though.

I think the OP was referring to the testator rather than the beneficiaries, although most estates hitting the IHT threshold do so because of house price inflation and or inheritances they received rather than the acquisition of large assets through work.

As far as the benificiaries are concerned it is an unearned windfall, so they hardly have room for complaint. My better half was the residuary beneficiary to her uncles estate, and the considerable IHT bill came out of her share, so we have been on the receiving end of an IHT hit, but have no problem with that.

If you want to do something about your own estate, then the solution is simple, be very generous to your family, freinds, charities and yourself while you have the chance don’t leave it to your dotage.

eddyinfreehold

Totally agree 'Keep Pedalling' in the last sentence.

My father saved and intended us all to benefit but would never discuss anything. His financial knowledge was derived from the local and national newspapers then misinterpreted as he got older. He would have been aghast to know his own stupidity and attitude to privacy meant his estate had to pay a very large 5 figure sum in IHT and without an awful lot of homework afterwards on our part it could have been a six figure sum. There is a diminishing generation of people who believe they know better but are not willing to take or pay for financial advice nor discuss it with their beneficiaries.

My advice is a) write a will with professional legal advice b) discuss the level of your wealth with your children/beneficiaries every time you see them and c) arrange a tax efficient get out when you are 7 years from death :-) if not, of course, before. Being proud but secretive of your wealth with your children is seeking trouble and angst and just makes an argument.

Hoploz

So eddyinfreehold, how did you reduce the IHT from 6 figures to 5 figures???

Red-Squirrel_2

Why do you want to avoid paying IHT? Do you not enjoy benefitting from public services? Do you not appreciate the NHS, schools, the police and fire services etc?

Yorkshireman99

Red-Squirrel wrote: »

Why do you want to avoid paying IHT? Do you not enjoy benefitting from public services? Do you not appreciate the NHS, schools, the police and fire services etc?

Read the OP's original post. It does not even say that they are a beneficary so what right have you to judge them in this way? The purpose of this forum is to help people not to make snide remarks.

eddyinfreehold

I agree with Red Squirrel here ... the bottom line is that all taxation spreads the cost of running society across the tax paying population. What percentage is taxed and what that tax is spent on is where politics steps in. There is the famous Jean-Baptiste Colbert quote, "the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing."


So eddyinfreehold, how did you reduce the IHT from 6 figures to 5 figures???

....Hoploz, it's complicated but bear with me.

Firstly the will was simple and the three executors were also the three beneficiaries and were empowered to dispose of the Estate as they jointly felt fit. A proportion of the IHT due was donated to either charities or CASCs of significance to the Executors. This doesn't mean the beneficiaries got any/much more, it's just that the IHT was reduced. The Charities and CASCs were able of course to reclaim Gift Aid at 25% as well. It's a bit like paying the tax but choosing how it is spent.


Secondly there was a major discrepancy when it came to sorting out the transferrable allowance of the deceased's spouse. Basically one of my parents had died about 50 years before the other in the days of Estate Duty. The surviving parent never remarried. When we called in all the wills and death certificates etc it transpired there was a major difference between the Probate Value on the first death and the actual estate value of the same because of a declared and inherited right to a share of a Trust on the death of the first parent's mother..........are you still with me? ......As the first death predeceased her mother and the Trust was exhausted when the time came, the first death never benefitted in spite of declaring it in Probate. We were able to have the 50 year old Probate reassessed and the Transferrable Allowance corrected. Does this make sense? It's a case that will almost never occur again I would think. It's also a good argument for keeping hold of important documents like solicitors correspondence and estate accounts for a very long time.