How to reduce Savings for IHT?

Larry12

Hi,
I'm approaching 80 and financially in a good position but need some advice please.  Both my wife and I have an estate of approx. £1.5m with £500k in savings/ISAs.    We receive 10k a year (jointly) in pension and dividends.
My son has lived with us for over 25 years and pays for pretty much everything bills, housework, food, etc.  We lead a very simple life and don't have any major outgoings.
I'd like to reduce my savings for IHT by helping out my young grandchildren on school fees and other costs but would this be classed as a PET?   We don't receive enough surplus income to justify these costs as surplus income but likewise our standard of living will continue to be the same.
Any help would be much appreciated.
Thank you.

xylophone

https://www.thetimes.co.uk/money-mentor/answer/school-fees-inheritance-tax/

You are unable to go the "regular gifts from income route" so it will need to be a PET.

You and your wife might open an account held by you in bare trust for each child and pay a lump sum into each account to cover the school fees for the number of years required.

Example
https://www.skipton.co.uk/savings/childrens/childrens-saver

The money can then be drawn out each term as required.

Otherwise, the school might offer a payment in advance scheme - the children's parents could check on this.

Larry12

Thanks....seems a little unfair that I can't spend my money on them but it is what it is.
What can I spend my money on?  I don't have any major outgoings and I've never been a big spender. 

Robin9

Larry12 said:

Thanks....seems a little unfair that I can't spend my money on them but it is what it is.
What can I spend my money on?  I don't have any major outgoings and I've never been a big spender. 

Make sure your house is "future proof" and in a good state of repair - bathrooms, accessible shower, decoration, chair lift ............. One thing we are doing is adding a second handrail.

My MIL used to reckon that £1000 spent on her house was another month less in a home (she lived at home till she was 97)

Savvy_Sue

You can, of course, spend your money on anything you like, and the IHT won't be your problem. On the first death, anything left to the spouse will be IHT free, leaving the survivor free to make changes to mitigate IHT. And if your estates are that large, taking some proper financial advice might bear dividends. How much is tied up in the family home, for example? 

If you leave donations to charity in your wills, for example, that can reduce the amount of IHT due to be paid. 

You can make donations now too, of course. 

getmore4less

Regular gifts from income would not help with IHT once over the nil rate bands,  they just stop assets growing.

Why not look at options to try to eliminate IHT

If son is going to stay living with you, there is the option to gift part of the property as a PET.
does he have family also living with you?

Is the other £1m a single house or multiple?

could convert more of the ISA to income generators to give away at the risk of capital not growing.

Stop having son pay all the bills.

That's on top of the PET option already mentioned.

Keep_pedalling

IHT does not punish you for gifting at worst it is neutral, at best you live a further 7 years and it reduces the tax on your estate, so it is silly not to gift ASAP. If you have so much surplus cash why is your son paying all the bills? If you don’t spend anything your estate just keeps going up in value, and you are way beyond the wealth accumulation stage, you should be running your savings down now. Try not to be so damn frugal spend some of it on yourselves.

Larry12

Thank you for all your comments.
-Our house is worth £1m.  The rest is in Cash & ISA
-I already have a PET in progress for another property i owned but gifted.
-I thought about gifting a % of our home to my son.  However, he also wants to buy his own home so I don't want to indirectly impact him for when he gets a mortgage or having to pay additional stamp duty.
-I will start paying more bills I guess & start spending money on the house.  How much detail will they look at during probate? do I keep receipts for everything?
-The other idea Ive started to look at his BPR funds but I don't know enough about them.

mobileron

With that amount why dont u get legal advise, better than a forum.

badger09

How many children do you have?
Why hasn't your son already bought his own home? If he can afford the mortgage repayments and all other bills, could you gift him enough for a deposit so he can buy now?
Then give each of your other children the same amount.
As well as spending on your own home & paying all your own bills!

Morrigan_2020

Larry12 said:

Thanks....seems a little unfair that I can't spend my money on them but it is what it is.
What can I spend my money on?  I don't have any major outgoings and I've never been a big spender. 

You can spend your money on whatever you like!  Of course you can spend it on your grandchildren.  

Would a bit of tax on your estate be such a terrible thing anyway?  You are well off, you have been fortunate, why not contribute a bit to the benefit of others?