IHT AND ESTATE PLANNING

JJDragonLivigno

Hi, 
we are planning on speaking to a financial advisor but do not want to go totally ignorant of what we can do...

Can anyone confirm the below - a yes/no answer is fine - I don't expect mega responses.
To optimise an estate and working out what can be considered a lifetime gift - hence not applicable to IHT:
1. if the property where the person trying to optimise their estate is resident and they put part of that property ownership into another resident of that property - being part of the family (child/grandchild) - would that be classed as a lifetime gift and so not included in their estate?
2. Can giving part of a persons' ISA to another person (within the annual limit) be considered a lifetime gift?
3. Buying a property for a family member (child/grandchild) - would this be considered a lifetime gift?
4. Can paying off a child/grandchild's mortgage be considered a lifetime gift?
5. paying off student loans - would the amount paid off be considered for IHT and included in the estate of a person?
6. Sending money to a relative who lives abroad and is not  and has never been a UK resident - would this movement of money be included in a persons estate for IHT purposes 

Is there  anywhere I can access a list of things you can do to optimise your estate so I can decide what is best and then go to a financial advisor for them to do it all properly?
thanks for any assistance,
JJ

Albermarle

I am not an expert but I would think all the examples above would be classed as lifetime gifts, so if you died within 7 years of making them , they would count towards IHT ( although only partly depending on how much less than 7 years ) 

Also if you had to go into care and wanted council funding , all these gifts could be seen as deprivation of assets.

By the way money in an ISA can only be left intact in the ISA to a Spouse I think, certainly not just to anybody .

Jeremy535897

Albermarle said:

I am not an expert but I would think all the examples above would be classed as lifetime gifts, so if you died within 7 years of making them , they would count towards IHT ( although only partly depending on how much less than 7 years ) 

Also if you had to go into care and wanted council funding , all these gifts could be seen as deprivation of assets.

By the way money in an ISA can only be left intact in the ISA to a Spouse I think, certainly not just to anybody .

There is no taper relief on outright lifetime gifts. Die 6 years and 364 days after making them, and they still form part of your estate for inheritance tax purposes, except to the extent to which they are covered by exemptions.

You can transfer part of the house you live in to someone else living there and have it treated as a lifetime gift, but care needs to be taken to avoid gifts with reservation and other anti-avoidance legislation.

If you make regular gifts to donees out of surplus income, those gifts may qualify for the normal expenditure out of income exemption.

Keep_pedalling

All of the things you list are lifetime gifts.

To cover the basics, is your estate actually in IHT territory? What is you net worth (joint if married)?

getmore4less

Once you have done all of those what will the total be?

There could be some taper relief(on the tax ) if big enough.

If you give away to a resident and they move out that complicates.

Jeremy535897

getmore4less said:

Once you have done all of those what will the total be?

There could be some taper relief(on the tax ) if big enough.

If you give away to a resident and they move out that complicates.

You only get taper relief in respect of chargeable transfers made in the seven years before death. These are PETs.

theoretica

For no 1, don't get so focussed on IHT you forget the capital gains tax liability that will build up if the person given a portion of the house moves out at any stage.

Are you also looking at the gift from income aspect?

getmore4less

Jeremy535897 said:

getmore4less said:

Once you have done all of those what will the total be?

There could be some taper relief(on the tax ) if big enough.

If you give away to a resident and they move out that complicates.

You only get taper relief in respect of chargeable transfers made in the seven years before death. These are PETs.

Failed PETS.

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14517

Jeremy535897

Yes, I should have stated that if you make PETs a certain period of years before death, that are so large that they are bigger than all the available nil rate band, there can be taper relief, but this very rarely happens.

getmore4less

With the OP list of gifts it could well be a substantial amount if they have enough for all of them.

It's not clear how much they are trying to offload.

Grumpy_chap

JJDragonLivigno said:

1. if the property where the person trying to optimise their estate is resident and they put part of that property ownership into another resident of that property - being part of the family (child/grandchild) - would that be classed as a lifetime gift and so not included in their estate?

Where will the person trying to optimise their estate reside if they give away the property where they are resident?