How to reduce Savings for IHT?

getmore4less

What's the plan for the house?
That uses up all your nil rate band if the PET does not fail. 

Larry12

Thanks for the advice.
I have 2 children and 3 grandchildren.
Yes I acknowledge that I'm fortunate.  My health has deteriorated in the past 2 years so I'm mainly at home now - my son looks after me and my wife.
Yes I could give him some money for a deposit but thought it is then a PET.  I was hoping to justify helping out with grandchildren financially has no impact on my standard of living even though I will have very little surplus income.  If I can't do that then need to consider alternatives.

Larry12

No plan for the house...we will pass it onto the kids in our will, so yes that will take up the full nill rate band.

relaxtwotribes

There are some excellent AIM-listed shares that qualify for the two-year IHT exemption rule.  My late mother had a shareholding for 5 years that not only fell out of her estate for IHT, but also increased in value by 60% during that period (plus paid dividends).  Only if you are comfortable with risk, of course.

Sea_Shell

Larry12 said:

No plan for the house...we will pass it onto the kids in our will, so yes that will take up the full nill rate band.

Will the "live in" child want to (stubbornly) remain in the house, or will they be happy to move out and be independent with their share of inheritance?

macman

relaxtwotribes said:

There are some excellent AIM-listed shares that qualify for the two-year IHT exemption rule.  My late mother had a shareholding for 5 years that not only fell out of her estate for IHT, but also increased in value by 60% during that period (plus paid dividends).  Only if you are comfortable with risk, of course.

My mum did a similar thing. The AIM investments dropped about 20%, but given the 40% saving in IHT, it was still beneficial overall. But, obviously, they could have dropped a lot more. The AIM market is not for the risk-averse investor.
OP: if your main concern is reducing the HMRC 'take', then have you considered rewriting your will? If you leave 10% of the net estate to charity then you will enjoy a reduced rate of 36%. Or, rather, your estate will. And of course the charitable gift reduces the residual estate subject to IHT.

getmore4less

macman said:

relaxtwotribes said:

There are some excellent AIM-listed shares that qualify for the two-year IHT exemption rule.  My late mother had a shareholding for 5 years that not only fell out of her estate for IHT, but also increased in value by 60% during that period (plus paid dividends).  Only if you are comfortable with risk, of course.

My mum did a similar thing. The AIM investments dropped about 20%, but given the 40% saving in IHT, it was still beneficial overall. But, obviously, they could have dropped a lot more. The AIM market is not for the risk-averse investor.
OP: if your main concern is reducing the HMRC 'take', then have you considered rewriting your will? If you leave 10% of the net estate to charity then you will enjoy a reduced rate of 36%. Or, rather, your estate will. And of course the charitable gift reduces the residual estate subject to IHT.

£1.5m with full allowances,  £200k tax , beneficiaries £300k  
£150k to charities  £126k tax, beneficiaries  £224k

Mojisola

Larry12 said:

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. 

Why are you accumulating savings while your son is paying for everything?

If you paid for everything in the household, your son could put money into his own personal savings instead of you adding to yours.

macman

getmore4less said:

macman said:

relaxtwotribes said:

There are some excellent AIM-listed shares that qualify for the two-year IHT exemption rule.  My late mother had a shareholding for 5 years that not only fell out of her estate for IHT, but also increased in value by 60% during that period (plus paid dividends).  Only if you are comfortable with risk, of course.

My mum did a similar thing. The AIM investments dropped about 20%, but given the 40% saving in IHT, it was still beneficial overall. But, obviously, they could have dropped a lot more. The AIM market is not for the risk-averse investor.
OP: if your main concern is reducing the HMRC 'take', then have you considered rewriting your will? If you leave 10% of the net estate to charity then you will enjoy a reduced rate of 36%. Or, rather, your estate will. And of course the charitable gift reduces the residual estate subject to IHT.

£1.5m with full allowances,  £200k tax , beneficiaries £300k  
£150k to charities  £126k tax, beneficiaries  £224k

I agree. But some people are obsessed with the idea that 'the taxman' will take it all, or any of it, and at least that way the total to HMRC is reduced by £74k and the total to charities and beneficiaries is increased by £374k.
The beneficiaries might not agree, but then it's not their decision.
The real issue here is that leaving estate planning until your health declines in your 80s is rather too late: why the OP's son is paying all the household bills is beyond me.

Marcon

Thanks for the advice.
I have 2 children and 3 grandchildren.
Yes I acknowledge that I'm fortunate.  My health has deteriorated in the past 2 years so I'm mainly at home now - my son looks after me and my wife.
Yes I could give him some money for a deposit but thought it is then a PET.  I was hoping to justify helping out with grandchildren financially has no impact on my standard of living even though I will have very little surplus income.  If I can't do that then need to consider alternatives.

I think sometimes people get so worked up about potential IHT or other taxes, and how to reduce or avoid them, that they lose sight of everything else. Deciding that you don't want to help with school fees if they won't reduce your IHT liability doesn't really stack up. If your children need help now, that is likely to be more important to them than an inheritance with lower IHT at some unknown future point

Get yourself some proper, paid for legal/tax advice to see if setting up some form of simple trust for the grandchildren would be a sensible course of action, and whether there are any other measures you can take without leaving a whole host of complex arrangements behind you when you and your wife have both died.

Spend some money helping your family now and you'll have the pleasure of seeing them getting the benefit and enjoying it. Nobody knows what the tax position is going to be a year from now, never mind several years on once the impact of COVID starts being paid for.