How and when do you plan for IHT?

justwhat

i have saved and attempted to accumulate wealth most of my life.

i now can't spend it all and it looks like due to receiving inheritance  from relatives, sooner or later we need to consider our IHT liability.

The thought of giving it all away leaves me feeling a little insecure. i am 52 this year.

 My partner and i are trying to loosen up on the moneysaving mode a little , but its hard to do when you have been a scrimper and saver most of your life.

So how do i plan or how have you planned for IHT? 



 

Jeremy535897

Presumably you have heirs you want to benefit? The best way is to talk to relatives to persuade them to leave the money you would otherwise inherit, but don't need, to your heirs rather than you personally. That way you avoid your estate increasing without giving anything away.

Keep_pedalling

You are only 52 so if you really are in IHT territory then there is no reason that in the near future you can’t switch from accumulation to spending more, whether that be on yourself or others. Saving until you die is rather foolish as it is others who really enjoy your wealth and frugality not you.

I presume you are not married or in a civil partnership, so a major step you can take, if that is the case, is either to marry your partner or form a civil partnership as everything left to a spouse is exempt from IHT, so unless you give over £325k to others no IHT is due on the first death however large your estate is.

As a married couple your nil rate bands allow you to leave £650k IHT free, and as you have children to leave your wealth too, that goes up to £1M.

Keep_pedalling

If you do inherit money in the future you can avoid adding that to your estate by completing a deed of variation to pass that directly to your children.

Jeremy535897

Keep_pedalling said:

If you do inherit money in the future you can avoid adding that to your estate by completing a deed of variation to pass that directly to your children.

True, but far better to avoid the issue in the first place as I suggested (deeds of variation are not as good in terms of income tax and capital gains tax).

justwhat

Jeremy535897 said:

Keep_pedalling said:

If you do inherit money in the future you can avoid adding that to your estate by completing a deed of variation to pass that directly to your children.

True, but far better to avoid the issue in the first place as I suggested (deeds of variation are not as good in terms of income tax and capital gains tax).

Surely a prompt deed of variation for liquid cash (liquidated estate) to a child below the IHT threshold at the time will incur no income tax or CGT?

Jeremy535897

You never know what the situation will be at the relevant time. Far better to get the wills right than rely on doing a deed of variation (which might not be tax effective at all if there is a change in the law).

Keep_pedalling

Jeremy535897 said:

You never know what the situation will be at the relevant time. Far better to get the wills right than rely on doing a deed of variation (which might not be tax effective at all if there is a change in the law).

Mind you it is not any easy task to get someone else to make new wills or even make a first one for many people.

Jeremy535897

Keep_pedalling said:

Jeremy535897 said:

You never know what the situation will be at the relevant time. Far better to get the wills right than rely on doing a deed of variation (which might not be tax effective at all if there is a change in the law).

Mind you it is not any easy task to get someone else to make new wills or even make a first one for many people.

Sadly very true. However, if they have made a will, they might be persuaded to change it. Getting them to make the first will is the hardest.

Albermarle

One way some people use is to make sure a significant portion of their wealth is in DC pension pots. These do not form part of your estate when you die so are not taken into account when IHT liability is calculated. Although if the pensions are too big that brings its own tax issues as well.
Of course without knowing any details about you or what pensions you have, this may not be relevant.

As mentioned above the most obvious way to avoid IHT is to gift generously and spend, spend, spend !