Best way to cut inheritance tax without gifting?

Sea_Shell

tommydog40 said:

Mojisola said:

tommydog40 said:

 I understand the most tax efficient solution is to gift assets during ones lifetime, but if that is not an option, one most explore other mechanisms. 

Then she should be willing to pay for professional advice and not expect you to stump up the money.

It does not matter what she should or should not do.  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.  In the meantime, I was just trying to explore some possible options.

Just doing a little maths here.    Even if your Mum achieved very modest growth on her total assets of 2% a year, that would be £25,000 of growth p.a. alone.   This growth has the potential to attract a further £10,000 IHT p.a.

So you "taking a while" to get the money together to pay for advice is like a first time buyer trying to keep up with a rising property market.    The IHT bill will just grow and grow and grow.

Would your Mum not even consider only giving you money just out of the growth of her fund, going forward.   You could try explaining that her current assets are "ringfenced" as so won't be touched, just any growth above, say £1.25M.

tommydog40

Sea_Shell said:

Just doing a little maths here.    Even if your Mum achieved very modest growth on her total assets of 2% a year, that would be £25,000 of growth p.a. alone.   This growth has the potential to attract a further £10,000 IHT p.a.

She does a lot better than that, just the Canda Life bond alone has nearly doubled in 10 years.  The fact is she won't touch any of the investments and the inheritance tax bill will continue to grow.  Like I said, she pretty much lives off her state pension.  She is very against gifting children money and was bought up that people should stand on their own feet.  She is generally financially prudent and does not even like to spend money herself.  It's an attitude I respect and I don't even want any money gifted to me.  I am on a low salary, but have never been in debt and get by with what I earn.  I really don't need any more money at this time in my life and even if I were to win a substantial amount of money, I would just invest it until retirement.  I do have plans for retirement and that's the time I would like to benefit from a substantial inheritance, but obviously I don't want large chunks swallowed up in inheritance tax.

Keep_pedalling

tommydog40 said:

Sea_Shell said:

Just doing a little maths here.    Even if your Mum achieved very modest growth on her total assets of 2% a year, that would be £25,000 of growth p.a. alone.   This growth has the potential to attract a further £10,000 IHT p.a.

She does a lot better than that, just the Canda Life bond alone has nearly doubled in 10 years.  The fact is she won't touch any of the investments and the inheritance tax bill will continue to grow.  Like I said, she pretty much lives off her state pension.  She is very against gifting children money and was bought up that people should stand on their own feet.  She is generally financially prudent and does not even like to spend money herself.  It's an attitude I respect and I don't even want any money gifted to me.  I am on a low salary, but have never been in debt and get by with what I earn.  I really don't need any more money at this time in my life and even if I were to win a substantial amount of money, I would just invest it until retirement.  I do have plans for retirement and that's the time I would like to benefit from a substantial inheritance, but obviously I don't want large chunks swallowed up in inheritance tax.

The last 10 years have been very good for investments, it doesn’t mean it is going to carry on for the next 10 doing the same thing.

there is a time in life to accumulate wealth and a time to make use of it, your mother is well beyond the latter. If you don’t make good of wealth in your latter years the whole thing has been an absolute waste of time. 

If she truly believes people should stand on their own two feet and wants to avoid IHT, she would be leaving you a nominal sum and the rest to charity. You will also struggle to find a IFA who is willing to deal with you about your mother’s finances without her being involved.

lincroft1710

You will just have to tell your mother that without proper professional advice, there is no way to safely cut the IHT bill and as she is unwilling to pay for such advice, nothing more can be done.

Sea_Shell

lincroft1710 said:

You will just have to tell your mother that without proper professional advice, there is no way to safely cut the IHT bill and as she is unwilling to pay for such advice, nothing more can be done.

I'm getting the impression that Mum isn't really that bothered! 

She's not going to be the one paying it.

Murphy_The_Cat

OP, I feel for you.

From this thread, it sounds like your Mum gets her kicks from adding up her pounds, schillings and pence and doesn't see any reason why HER  money should be spent so that YOU get more of HER money. Unfortunately, until she has an epiphany, she is going to be helping Rishi pay off the deficit, to the tune of several hundred thousand £££££'s, rather than keeping HER money within the family.

Once again, I feel for you.

Sea_Shell

OP, do you have any children of your own, mum's grandchildren?

tommydog40

Sea_Shell said:

OP, do you have any children of your own, mum's grandchildren?

I don't have any children and have never been married.

Just one idea, if I could miraculously persuade her to "gift" me some funds in my name, on provision that I don't deplete any of these funds in her lifetime (I would setup a different bank account for this).  Would I then be free to "gift" her funds from this account in my name to pay all her bills, house repairs etc?  Or would this be a gift with reserved benefit?  An alternative may be to leave these funds in tact in this account and use my other bank account where my wages are paid into to pay her bills, house repairs etc.  That way it would not be her money that I am gifting to her, so can't see it would fall under the reserved benefit rules. 

Keep_pedalling

Murphy_The_Cat said:

OP, I feel for you.

From this thread, it sounds like your Mum gets her kicks from adding up her pounds, schillings and pence and doesn't see any reason why HER  money should be spent so that YOU get more of HER money. Unfortunately, until she has an epiphany, she is going to be helping Rishi pay off the deficit, to the tune of several hundred thousand £££££'s, rather than keeping HER money within the family.

Once again, I feel for you.

For some people it seems the possession of money is more important than actually make good use of it. And for many of these it seems once a miser, always a miser.

Brie

tommydog40 said:

Just one idea, if I could miraculously persuade her to "gift" me some funds in my name, on provision that I don't deplete any of these funds in her lifetime (I would setup a different bank account for this).  Would I then be free to "gift" her funds from this account in my name to pay all her bills, house repairs etc?  Or would this be a gift with reserved benefit?  An alternative may be to leave these funds in tact in this account and use my other bank account where my wages are paid into to pay her bills, house repairs etc.  That way it would not be her money that I am gifting to her, so can't see it would fall under the reserved benefit rules. 

Why not get her to set up joint accounts with you to contain the full £130k and any other cash you say she has.  She would, while she remained capable, have full control but it would mean that if you need to enact the POA then you would have fund easily available to pay for her care etc.  And care cost are inevitable unless she is amazingly lucky and lives another 20 years without any health issues whatsoever and then dies suddenly in a blaze of glory.  This would (so I've been told) mean that half the balance would be considered yours and so upon her death her half for tax purposes would be only £65k.  This may be subject to the 7 year rule again.

Likewise - I didn't see anything about whether you live with her or your age.  But again, if she needs care, the house will need to be sold to pay for it - unless you are also living there and are at least 60 (not impossible but unlikely if she's a mere 75 currently).  Again there may be some understanding that your share in the house increases each year.  

AND - do you just have a financial POA or do you also have one to deal with the medical side of it as well?