Re wills and IHT on first death

Snowbelle

joe134 wrote: »

Was not thinking of evading tax, (heaven forbid) just avoiding it, which I am sure is quite legal.,
Apparently, wife has decided who gets what with her jewellery, hope fully before she dies.
On can really only estimate a value.
Valuing is not exactly a science, and accurate, as I said, everything is only what what someone will pay for it ie: the house,car,etc
In fact, the whole estate, but it is only the house that will be sold, nowt else, the rest will be donated to the charity shop, which we donate to now, local hospice.

Even if you are going to donate it to the charity shop HMRC will still consider it to have a value.

joe134

Snowbelle wrote: »

Even if you are going to donate it to the charity shop HMRC will still consider it to have a value.

Seems one cannot win Snowbelle.
Rings will also be gifts ,so 7 years rule will apply.
Looks like a new car and kitchen etc��
Suppose we should be grateful.
If Labour get in, there will be no tax free allowance.
There’s always a silver lining.:))

getmore4less

Hi Guys, don’t know if this is right thread to post this ?
I am going through my wife and my financial affairs to make it easier for my wife should I go first.
I have itemised all my bank a/cs and hers should it be vice versa, so she can just put her hand on them.
I don’t know whether she will try and obtain probate on her own, with the kids help, or get a solicitor or other? She says she would try herself ?

Get a full set of IHT400 forms and get her to do a practice run pretending you died today.

No help finding information just what she knows.

DO the same yourself as if she had died.

you can work through together researching stuff you don't know.


Also document workplace benefits and pensions even though they tend to be outside estates


Your understanding of IHT needs a lot more research.
Spouse exemptions, both nil rate bands, how they transfer, also look at IPDI trusts

Transferring part of your property to kids on first death(as some say they have done) is often a very bad option and can have serious knock on effects for both IHT and CGT.

Often better to just use an IPDI trust for the house share leaving the spouse as a life tenant

....................................................................
With an everything to spouse then passed onto issue(kids) you can keep it relatively simple.

IPDI trust are often used to ring fence the house from care fees and they work as if the spouse got everything anyway for IHT and CGT.

Then there are survivorship clauses for close death as they can simplify the process but there are some cases where these can increase the tax due.

---

Another major confusion and misinformation is surrounding lifetime gifts.

In MOST cases these are IHT neutral.
There is no extra tax to pay if you make gifts and die within 7 years.

---

AS your current asset base is over £1m some IHT planning would make sense

Start with Accumulation:
probably time to stop accumulating more assets by using up all income. spending, gifting and potentially pensions to take it out of the estate are quite effective.

---

Early stages of getting to grips with what you need to do, most of it is not that hard/complicated just there is a lot to learn and it takes time.

getmore4less

A few things to think about.

bowlesbargain wrote: »

I am in the same position as the person who posted this. I am trying to give money to Children/Grand Children and fingers crossed I will live seven years and the sum will be free from Tax.

Gifts are tax neutral for the 7 years nothing extra to pay


But a friend has just died without notice and this does rock you and fix the mind.

I am thinking of changing my will so that the 1st £325,000 from Mine/wife's death goes to the children then they can sort the other partner out when it comes to that but they have got working capital for IHT.

The problem with that is it uses up the nil rate band so is no longer transferable, doing that or setting up a nil rate band trust was popular before the transferable nil rate band came in.
Another option is transfer to spouse retaining the transferable nil rate band, spouse immediately gifts to kids and hopes to live 7 years
Tax neutral, but can end up with a full nil rate and the money gifted.

We changed the house some years ago to Tennets in Common so half the house will go to the children on first death.

This can be a very bad idea as it uses up nil rate band and makes any future value increase subject to CGT for the kids.
Also if kids get into financial difficulty the house is at risk
Most common solution is IPDI trust with spouse as life tenant.

Not sure if this is the correct course of action but it may help.
Thank you to everyone who posted on this thread it has helped me with a few questions

review carefully what you are planning.

Malthusian

Snowbelle wrote: »

Even if you are going to donate it to the charity shop HMRC will still consider it to have a value.

Charitable gifts are exempt from IHT, same as bequests.

bowlesbargain

getmore4less wrote: »

A few things to think about.




review carefully what you are planning.

Thankyou for your advice. This thread has at least got me to have both of my children sit down tell them what we have in assets etc, I am copying the will and they will both have a copy. I dont think I am going to change the will. I am going to give the children a bigger slice now hope we both live 7 years (Do I need to fill out any forms to prove the date.) I gave one daughter some money 10 years ago for a deposit for house no idea what date would the daughter have to prove to HMRC the date of that gift.

Whats a IPDI Trust that maybe what my first solicitor set up. May have now been removed from my Will

Thanks for the comments

joe134

getmore4less wrote: »

Get a full set of IHT400 forms and get her to do a practice run pretending you died today.

No help finding information just what she knows.

DO the same yourself as if she had died.

you can work through together researching stuff you don't know.


Also document workplace benefits and pensions even though they tend to be outside estates


Your understanding of IHT needs a lot more research.
Spouse exemptions, both nil rate bands, how they transfer, also look at IPDI trusts

Transferring part of your property to kids on first death(as some say they have done) is often a very bad option and can have serious knock on effects for both IHT and CGT.

Often better to just use an IPDI trust for the house share leaving the spouse as a life tenant

....................................................................
With an everything to spouse then passed onto issue(kids) you can keep it relatively simple.

IPDI trust are often used to ring fence the house from care fees and they work as if the spouse got everything anyway for IHT and CGT.

Then there are survivorship clauses for close death as they can simplify the process but there are some cases where these can increase the tax due.

---

Another major confusion and misinformation is surrounding lifetime gifts.

In MOST cases these are IHT neutral.
There is no extra tax to pay if you make gifts and die within 7 years.

---

AS your current asset base is over £1m some IHT planning would make sense

Start with Accumulation:
probably time to stop accumulating more assets by using up all income. spending, gifting and potentially pensions to take it out of the estate are quite effective.

---

Early stages of getting to grips with what you need to do, most of it is not that hard/complicated just there is a lot to learn and it takes time.

Thanks for info G, much appreciated, seems I have only started what is to be a longish learning curve.
I have a lot to find out, to be able to pass it on.
At present, I just want the basics so in the event I die first, my wife is secure with the help of the kids , she can get through probate, IHT, if necessary, a straight forward process.
In the event we go together, then the kids will kick in, and deal with the whole lot themselves,so I have to know both scenarios, to be able to inform them .
As you say, stop accumulating assets, and get rid, so the IHT hopefully is not required, even though the procedure of going through it does.

It is going to take me a long time to familiarise myself, to be able to inform them, and will do a paper exercise, of Iht400, which I presume is for when myself and wife have both gone?
Is this correct, or am I wrong again.:)

Gifts being IHT neutral, that’s new to me, is that money as well?
I thought all gifts were in 7 year rule!

Being retired and plenty of time it gives me time, but, one never knows what’s round the corner, thank goodness.
I appreciate all you have said, will absorb it, and hopefully, act upon it.
That applies to all other advice kindly given on here.
I have just made arrangements to renew our wills with a solicitor, first port of call, for mirror wills, naming kids as joint executors, with us as first when are alive.
:beer::beer:





iPDI?

joe134

bowlesbargain wrote: »

Thankyou for your advice. This thread has at least got me to have both of my children sit down tell them what we have in assets etc, I am copying the will and they will both have a copy. I dont think I am going to change the will. I am going to give the children a bigger slice now hope we both live 7 years (Do I need to fill out any forms to prove the date.) I gave one daughter some money 10 years ago for a deposit for house no idea what date would the daughter have to prove to HMRC the date of that gift.

Whats a IPDI Trust that maybe what my first solicitor set up. May have now been removed from my Will

Thanks for the comments

Hi B, not on my own it seems, like you IPDI is a new one, as most of it is.

Ignorance is not bliss when the taxman is concerned.:)

getmore4less

IPDI is the name for life interest trusts created by wills
Often used to protect 1/2 a house from care fees but give the spouse the right to live there.

The rules changed in 2006 to close some loopholes, the Immediate Post death Interest trust remained for people to ring fence assets on first death in a relatively tax efficient way.

google "IPDI trust" more info than you ever wanted.

Gifts being IHT neutral, that’s new to me, is that money as well?
I thought all gifts were in 7 year rule!

The IHT tax position does not change at the time you gift(ie. it is a neutral act) they become a PET(potentially exempt transfer) then after 7 years the gift drops off the estate.

That is for gifts that don't have some other exemption like the £3kpy small gift and regular gift...

It is going to take me a long time to familiarise myself, to be able to inform them, and will do a paper exercise, of Iht400, which I presume is for when myself and wife have both gone?
Is this correct, or am I wrong again.

Do them for each of you going first.
what is does is help you identify the information needed and where to find it.

there are a lot of IHT400 forms but many will not be needed, it will be handy to have the list of what will be needed.

each has a decent set of notes that help and for terms you are not familiar with google helps.

Also if in the future something changes you may remember that it needs another form.

What will be useful is doing things like hunting down for each institution things like their bereavement processes, not so easy when you have just lost a partner.


Another thing I recommend is practising with the HMRC IHT manual.
IT can be really helpful in a lot of cases and often includes examples.

google IHT manual xxxxxxxxx terms.

eg here is the start of the section that covers gifts.
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14000

Malthusian

joe134 wrote: »

Gifts being IHT neutral, that’s new to me, is that money as well?
I thought all gifts were in 7 year rule!

GM4L has answered the question, but just for a simplified answer:

People often get it into their heads that it's a risk to make gifts because if they don't survive the 7 year period their children will be taxed on it. This isn't true; from an IHT perspective it's a shot to nothing. If you survive 7 years you win and if you don't your estate only pays IHT that it would have paid anyway.

Only thing to bear in mind is that the estate pays IHT, not the recipient of the gift, unless there is no money in the estate to pay IHT. So while it's a shot to nothing from the estate's perspective it may not be from the perspective of individual beneficiaries.

So if I have two sons who are my sole heirs, and I give £100k to one but not the other, and die within 7 years, both sons will effectively pay £20k tax each on that gift. (Unless there is no money in the estate to pay the IHT bill.) It won't come out of the recipient's share only.