Best way to cut inheritance tax without gifting?

Keep_pedalling

tommydog40 said:

Jeremy535897 said:

That's why I said it cannot just be a bare trust arrangement. You should be able to override HMRC's assumption by evidencing an intention to gift half at the time the account is made joint. But mother would have to do that.

So presumably something like this would work:

a) Mum makes a written declaration saying I am gifting you X amount of funds and transfers the funds to my personal account
b) Once the "gift" has been transferred to my personal account, it would then legally become mine to do as I wish with.
c) I would then setup a joint account with mum and deposit this gift into the joint account from my personal account.
D) In the event that mum dies before me, the money in the joint account would not be subject to inheritance tax, as it would have been me who  provided all the contributions to the joint account, as I held this money in my own name before it entered a joint account.  

"HMRC will normally regard each account holder as beneficially entitled to the proportion of the account attributable to their contributions. So, if the deceased provided all the money, the whole amount will be subject to inheritance tax on his death"

I am pretty sure HMRC would see that as an attempt at tax evasion. In reality your mother would still be the provider of the money, and as it has ended up in a joint account she still has control of the “gift” so it won’t qualify for the 7 year rule.

Jeremy535897

Keep_pedalling said:

tommydog40 said:

Jeremy535897 said:

That's why I said it cannot just be a bare trust arrangement. You should be able to override HMRC's assumption by evidencing an intention to gift half at the time the account is made joint. But mother would have to do that.

So presumably something like this would work:

a) Mum makes a written declaration saying I am gifting you X amount of funds and transfers the funds to my personal account
b) Once the "gift" has been transferred to my personal account, it would then legally become mine to do as I wish with.
c) I would then setup a joint account with mum and deposit this gift into the joint account from my personal account.
D) In the event that mum dies before me, the money in the joint account would not be subject to inheritance tax, as it would have been me who  provided all the contributions to the joint account, as I held this money in my own name before it entered a joint account.  

"HMRC will normally regard each account holder as beneficially entitled to the proportion of the account attributable to their contributions. So, if the deceased provided all the money, the whole amount will be subject to inheritance tax on his death"

I am pretty sure HMRC would see that as an attempt at tax evasion. In reality your mother would still be the provider of the money, and as it has ended up in a joint account she still has control of the “gift” so it won’t qualify for the 7 year rule.

You would only stray into the area of tax evasion if there were undisclosed factors that meant the original gift by mother was not a gift at all. It is more likely to be regarded as an attempt at tax avoidance, and would be struck down on the basis that the original source of the funds is mother, as I said earlier. It might just work, but I cannot see mother going with it, if she won't make lifetime gifts.

getmore4less

Unless you over come the reluctance to gift or spend there is nothing you can do.

Shuffling money around to obfuscate the real intent can come unstuck.


It is possible to make money disappear but not in the quantities required to eliminate the liability(or make a dent in it).

tommydog40

Jeremy535897 said:

You would only stray into the area of tax evasion if there were undisclosed factors that meant the original gift by mother was not a gift at all. It is more likely to be regarded as an attempt at tax avoidance, and would be struck down on the basis that the original source of the funds is mother, as I said earlier. It might just work, but I cannot see mother going with it, if she won't make lifetime gifts.

Would it make it easier if there was a 3rd party?  A scenario like this:

a) Friend gifts me 100k into my personal bank account
b) I then setup a joint account with mum and place this 100k gift from my friend into this account.
c) Mum then gifts 100k to friend, or gifts me 100k and then I gift this to friend.

This way there would be no direct link between the actual funds that mum gifts me and the funds in the joint bank account.  Plus at the time of my mothers death, the only record of funding this joint account will be from a gift that has come from my friend.

Sea_Shell

That sound like a great way for you all to get your bank accounts frozen!!!

Sea_Shell

Would Mum ever sign anything that states any money being transferred is a gift?  If not, none of these schemes will work IMO.

Sea_Shell

Sea_Shell said:

Just as a side issue...with so much money at stake...

OP, do you have a will, and if so who are your beneficiaries?

What if you happen to predecease Mum? Who then inherits her estate?

If you don't have a will, who would inherit under intestacy if your parents have passed?    Aunts, Uncles, Cousins?


ETA - is your dad still alive?

I'm still interested in the answers to these questions.

Is your Mum's reluctance to gift to you, clouded by where your (her) estate may end up?

theoretica

Is there any chance you may need to claim benefits?  If your mother gives you money, but you promise not to use it, that would leave you ineligible for anything means tested.

Jeremy535897

tommydog40 said:

Jeremy535897 said:

You would only stray into the area of tax evasion if there were undisclosed factors that meant the original gift by mother was not a gift at all. It is more likely to be regarded as an attempt at tax avoidance, and would be struck down on the basis that the original source of the funds is mother, as I said earlier. It might just work, but I cannot see mother going with it, if she won't make lifetime gifts.

Would it make it easier if there was a 3rd party?  A scenario like this:

a) Friend gifts me 100k into my personal bank account
b) I then setup a joint account with mum and place this 100k gift from my friend into this account.
c) Mum then gifts 100k to friend, or gifts me 100k and then I gift this to friend.

This way there would be no direct link between the actual funds that mum gifts me and the funds in the joint bank account.  Plus at the time of my mothers death, the only record of funding this joint account will be from a gift that has come from my friend.

It would be very nice to have a friend who gives £100,000 without any guarantee that the rest of the transactions will take place. (Such a guarantee would invalidate the whole idea.)

Basically what you are trying to do is to make it look as if a joint account in the names of you and your mother originated from your funds, not your mother's, to take advantage of HMRC's assumption that the joint account belongs to one of the holders (you) if that person provided the funds to it. The trouble is that, no matter how many transactions you go through, if HMRC are made aware of their existence, the idea fails, because the origin of the funds is mother, and if they are not made aware, you would be concealing the source of the funds. You are also multiplying up potentially exempt transfers if the plan is taken at its face value.

tommydog40

Jeremy535897 said:

Basically what you are trying to do is to make it look as if a joint account in the names of you and your mother originated from your funds, not your mother's, to take advantage of HMRC's assumption that the joint account belongs to one of the holders (you) if that person provided the funds to it. The trouble is that, no matter how many transactions you go through, if HMRC are made aware of their existence, the idea fails, because the origin of the funds is mother, and if they are not made aware, you would be concealing the source of the funds. .

From an hypothetical point of view, I guess it would be easier if a person did this with their own savings. If they had their own savings in bank account A, they could then transfer 100k of savings from bank account A into a joint account with their mother. A few months later, mother could decide to "gift the person 100k from mothers personal account to the persons bank account B. This would ensure complete separation of any of the funds making it into the joint bank account.

To be fair it surprises me that if we have inheritance tax, they even allow the loophole about gifting in a lifetime not being subject to inheritance tax. Hypothetically a wealthy individual could gift everything in his lifetime and his estate would pay no inheritance tax - how exactly does that help HMRC? If parliament really wanted they could subject any gift in a persons lifetime to a large tax penalty. Secondly, it really surprises me how a party like the conservative party keep inheritance tax. Many people in the conservative party hold considerable wealth, and I can't imagine inheritance tax is popular with them. Not all countries have inheritance tax.