IHT - Best way to avoid

infinity87

Good evening. My widowed mother is soon to sell her substantial property. She has assets and savings totaling around £850k-£900k including the house. As a family (Mother and 2 sons) we want to know the best way to avoid inheritance tax of the remaining cash, assuming my mum buys another house in her name for around £300k-£350k.

If she "gifts" the remainder to me, & puts the cash in my name, but keeps hold of the bank card so she can still spend it whenever she pleases, is this a valid & legal option? I'm aware of the 7 year rule, but if the bank account is in my name, would it technically belong to me?

We are looking for a relatively simple legal loophole so to speak, if such a thing exists. We intend to seek professional financial advice in due course, but would like a few ideas from other money saving experts to help us make a decision. 

Advice appreciated.

getmore4less

There are no simple legal loopholes.

As there is a predeceased spouse that could add to the nil rate bands

You will need to research.

Deceased spouse estate
Nil rate bands
gift with reservation 
pre-owned assets

Once you know what the potential IHT might be you can consider the options if needed.

The simple legal one for mum is spend the money on herself.

Keep_pedalling

What you suggest is nuts, if she did that what is going to stop you keeping it? I am sure your sibling might have something to say about this.

If you mother is a widow then her estate may not have any IHT to pay. 

greyteam1959

What a daft idea.
Get some professional advice.

RAS

Based on your other posts, dad died three years ago? And mum's estate is worth a lot some £2-3000K less now?

Your mother is likely to live another 2-3 decades, although asset planning is not a bad idea, giving away the money would be stupid if she's got less than £1m. And potentially Deprivation of Assets.

She needs to get some good professional advice on what to do with her liquid assets. And you need to keep out of her affairs.

Marcon

infinity87 said:

Good evening. My widowed mother is soon to sell her substantial property. She has assets and savings totaling around £850k-£900k including the house. As a family (Mother and 2 sons) we want to know the best way to avoid inheritance tax of the remaining cash, assuming my mum buys another house in her name for around £300k-£350k.

If she "gifts" the remainder to me, & puts the cash in my name, but keeps hold of the bank card so she can still spend it whenever she pleases, is this a valid & legal option? I'm aware of the 7 year rule, but if the bank account is in my name, would it technically belong to me?

We are looking for a relatively simple legal loophole so to speak, if such a thing exists. We intend to seek professional financial advice in due course, but would like a few ideas from other money saving experts to help us make a decision. 

Advice appreciated.

Not just technically, but legally. 

You don't need a loophole. Just read https://www.gov.uk/guidance/how-downsizing-selling-or-gifting-a-home-affects-the-additional-inheritance-tax-threshold and that should clarify your options.

'Ideas' from 'money saving experts' aren't your answer. Professional advice is!

SeniorSam

If your Father left his estate to your mother, then on your mothers death, there will be an inheritance tax allowance of £325,000 each. In addition, there will also be an allowance of £175,000 each as residential allowance. Therefore, in total, allowances of £1,000,000.

There is no need for your mother to gift any of her assets to anyone and she can njoy them fully herself until her death.  Should she feel that she has sufficient surplus capital to make gifts, then she can gift £3000 each tax year to anyone, can also make gifts of £250 to as many people as she wishes. Larger gifts are possible, but if the estate grows above the overall allowances and inheritance tax could be payable, then those additional gifts will still count in the value of herts estate for the calculation of taxes if she does not live seven years. There may be a reduction in the potential tax after 3 years when the liability may reduce each year until the 7th.

getmore4less

Marcon said:

infinity87 said:

Good evening. My widowed mother is soon to sell her substantial property. She has assets and savings totaling around £850k-£900k including the house. As a family (Mother and 2 sons) we want to know the best way to avoid inheritance tax of the remaining cash, assuming my mum buys another house in her name for around £300k-£350k.

If she "gifts" the remainder to me, & puts the cash in my name, but keeps hold of the bank card so she can still spend it whenever she pleases, is this a valid & legal option? I'm aware of the 7 year rule, but if the bank account is in my name, would it technically belong to me?

We are looking for a relatively simple legal loophole so to speak, if such a thing exists. We intend to seek professional financial advice in due course, but would like a few ideas from other money saving experts to help us make a decision. 

Advice appreciated.

Not just technically, but legally. 

You don't need a loophole. Just read https://www.gov.uk/guidance/how-downsizing-selling-or-gifting-a-home-affects-the-additional-inheritance-tax-threshold and that should clarify your options.

'Ideas' from 'money saving experts' aren't your answer. Professional advice is!

That covers the downsizing but not the gift with reservation by having full access the funds

SeniorSam

Perfectly correct. Any gift made where the person making the gift still retains access to that gift, being it a house or money, then the gift will not be accepted as it is a gift WITH RESERVATION.

In addition, should your Mum need to go into residential care, then again, the gift of capital, or a property, may still be claimed against for care costs.

Do take advice from the legal profession so that you fully understand what is correct.

infinity87

Thank you all so much for the replies, much appreciated, it seems professional advice is the best option.

My mother wants to offload at least some of her capital, so she can help me, my brother and her grandchildren out, and enjoy all that comes with that whilst she's alive, something sadly my father never got to see. 

Keep_pedalling

infinity87 said:

Thank you all so much for the replies, much appreciated, it seems professional advice is the best option.

My mother wants to offload at least some of her capital, so she can help me, my brother and her grandchildren out, and enjoy all that comes with that whilst she's alive, something sadly my father never got to see. 

Which is a totally different thing to what you were suggesting in the opening post. Assuming your parents were married and that your mother inherited everything from your father then IHT is not an issue, as using the transferable allowances from your father she can leave £1M tax free.

She still has ample assets to provide security for her old age and to make generous gifts to her children and grandchildren without running into the issue of deliberate deprivation of assets.

All her other assets should remain in her own name, but I would strongly recommend that she make lasting powers of attorney (LPA) so that her children will be able to manage her financial and welfare affairs if she ever loses the capacity to do them her selves.