Best way to cut inheritance tax without gifting?

Sea_Shell

I'm not sure it's possible to simultaneously keep your assets and at the same time "dispose of" those assets for IHT purposes.

If it was, don't you think we'd all be doing it?


As for being asked to pay for professional advise on this matter out of your own pocket...

Mojisola

tommydog40 said:

I have to deal with the situation as it is.  I will pay for some professional advice when I have the funds, but it will take me a while. 

There is another option - you just say no to you paying for advice.

Murdina

tommydog40 said:

Murdina said:

setting up a trust will require a lot of professional fees (there will be annual tax returns for example and 10 year IHT returns potentially) and someone is going to have to pay those.These are over and above the fees for the advice that tells you whether or not you will save IHT by setting up a trust.

Based on the figures I quoted for her estate, does anyone have a rough estimate as to how much IHT a trust may save?  If it was going to be worthwhile, I would be willing to pay professional fees for the trust.  I would just need to budget for it and save up.  If it would provide a clear financial benefit to myself in the long run, it would be a no brainer.

It is just not that simple. I would refer you to the comment I just noticed on this website https://www.moneyhelper.org.uk/en/family-and-care/death-and-bereavement/using-a-trust-to-cut-your-inheritance-tax "Trust law is complicated, and if you’re not careful you can walk into an immediate tax charge when setting it up".

The way the simpler schemes work is in effect to make use of the nil rate band by giving assets away up to that limit, then living another 7 years and the nil rate band in effect starts again. As pointed out above with the family home (if bequeathed to a child) there is the potential for a larger IHT band.

Your mother may live the 7 years or she may not. She may live another 20 years and in 20 years' time the tax planning you have done is completely undone by changes in legislation meanwhile. It is just not that simple and clearcut - so you could well invest money in taking professional advice which you do not recover by paying less IHT when she dies. Tax planning which involves looking into the future is always going to be surrounded by risk. What for example if you were to die before her? There are no easy answers.

tommydog40

Mojisola said:

tommydog40 said:

I have to deal with the situation as it is.  I will pay for some professional advice when I have the funds, but it will take me a while. 

There is another option - you just say no to you paying for advice.

That would be cutting off my nose to spite my face, as she will not pay and things will be left as they are with a large inheritance tax bill to pay in the future.  Since I am the one who will ultimately benefit from her estate when she dies, it is in my interest to pay for advice if it could result in substantial tax savings upon her death. 

theoretica

Is her aim to minimise inheritance tax paid, or maximise your eventual inheritance?  Because minimising inheritance tax is actually quite simple - she writes a will giving you the maximum that can be inherited tax free, and giving everything above that to charity. But you would only get about half a million that way.

Putting things into trust is complicated, and the cases I know involved the person giving the money away, into the trust fund, before death.

tommydog40

theoretica said:

Putting things into trust is complicated, and the cases I know involved the person giving the money away, into the trust fund, before death.

I know the trust involves technically "giving" assets to the trust, but if she has full control of everything in the trust, I don't think she would have a problem with that.  I would also give assurance that I will not realise any benefit from the trust in her lifetime.

To answer your other question, she would like to maximise my eventual inheritance.

Keep_pedalling

tommydog40 said:

theoretica said:

Putting things into trust is complicated, and the cases I know involved the person giving the money away, into the trust fund, before death.

I know the trust involves technically "giving" assets to the trust, but if she has full control of everything in the trust, I don't think she would have a problem with that.  I would also give assurance that I will not realise any benefit from the trust in her lifetime.

To answer your other question, she would like to maximise my eventual inheritance.

Her refusal to spend anything or give anything away rather kiboshes what she wants to achieve. You can’t magic the IHT away with a trust.

She could look at investing in AIM shares which become exempt from IHT after holding them for 2 years, but these are very high risk investments and not for the faint hearted.

theoretica

tommydog40 said:

theoretica said:

Putting things into trust is complicated, and the cases I know involved the person giving the money away, into the trust fund, before death.

I know the trust involves technically "giving" assets to the trust, but if she has full control of everything in the trust, I don't think she would have a problem with that.  I would also give assurance that I will not realise any benefit from the trust in her lifetime.

To answer your other question, she would like to maximise my eventual inheritance.

I think you will be very disappointed in what trusts can do - her money before she dies, but my money afterwards so very similar to normal inheritance but with less tax - that is exactly what the government don't want happening, and they wrote the tax rules.

https://www.gov.uk/guidance/trusts-and-inheritance-tax

Jeremy535897

There is no point in mother creating a trust if she can still benefit from it. It just makes things worse. The trust property would still form part of her estate for inheritance tax, and there might be capital gains tax issues as well.

If she won't make gifts in her lifetime, as I said earlier, you can't make inheritance tax go away on her death. She is subject to inheritance tax on her worldwide estate, so the location of the offshore bonds is irrelevant.

Sea_Shell

tommydog40 said:

Mojisola said:

tommydog40 said:

I have to deal with the situation as it is.  I will pay for some professional advice when I have the funds, but it will take me a while. 

There is another option - you just say no to you paying for advice.

That would be cutting off my nose to spite my face, as she will not pay and things will be left as they are with a large inheritance tax bill to pay in the future.  Since I am the one who will ultimately benefit from her estate when she dies, it is in my interest to pay for advice if it could result in substantial tax savings upon her death. 

I see now why your Mum wants to you pay the fees for any professional advise.  It's because you'll be the one to benefit from it, not her.   You want more inheritance, you pay for the advice.    I can see why you'd want to, as you'd rather £300,000 end up in your bank and not the Treasury's!!

Has your Mum given any reasoning as to why she is so anti-gifting?    Does she really not want you to have the money?  Does she not want to make your life a little easier while she's alive?


Be VERY careful if you use your Power of Attorney to move any of your Mum's money about, as you should always act in HER best interests.     I think you said up thread that this hasn't been registered with any banks etc. as its written that she has to have lost capacity, but will she actually be the one giving any instructions to move money?

While she has the capacity to gift, she really should, because once that is gone, you can't gift yourself using the PoA!


At the end of the day, your inheritance is whatever is left over after all debt and TAXES.    So if that ends up being £300,000 less than you think you're due, then that's the way it is.    Mum could end up needing to go into care for many years, and she could still burn through enough cash to come out of the IHT band altogether.