We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
We're aware that dates on the Forum are not currently showing correctly. Please bear with us while we get this fixed, and see Site feedback for updates.

Minimising IHT

Afternoon all,

For a married couple with property assets that takes them over the combined £1M IHT threshold, what is the best way to minimise IHT liability?

Thus far, my thoughts:

Liquidate amounts above £1M (appreciate not that straight forward) and either contribute to personal pension (within allowances) since LTA abolition.

Liquidate and gift amounts over the threshold (noted 7 year taper rule applies).

Place property in offspring's name and pay market rate to remain within or don't and move out (assumed 7 year rule applies as well).

TIA!
Fortior quo paratior
«1

Comments

  • Brie
    Brie Posts: 13,477 Ambassador
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    Do the offspring want the house and to be "landlords"?  What if they get divorced and have to sell as it's their property and therefore part of the marital assets?  If you continue to live there who's responsible for maintenance and repairs?  Can they afford it?

    Any gifts of cash or property will be taken into account should you need assistance with care in your advancing years.  Sounds like this may not be an issue but the local authority could still take the price of care out of the value of the gifted property and invoice whomever you gift cash to as it would be considered deprivation of assets.  Not an IHT thing of course but something to keep in mind.  
    I’m a Forum Ambassador and I support the Forum Team on Debt Free Wannabe and Old Style Money Saving boards.  If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.

    "Never retract, never explain, never apologise; get things done and let them howl.”  Nellie McClung
  • Albermarle
    Albermarle Posts: 25,968 Forumite
    10,000 Posts Sixth Anniversary Name Dropper
    Pipz said:
    Afternoon all,

    For a married couple with property assets that takes them over the combined £1M IHT threshold, what is the best way to minimise IHT liability?

    Thus far, my thoughts:

    Liquidate amounts above £1M (appreciate not that straight forward) and either contribute to personal pension (within allowances) since LTA abolition. To contribute to a pension and get tax relief, you need relevant earnings. In English means if you earn £30K you can not add more than £30K gross to a pension. If you have no earnings then the max is £3600 ( per tax year) 

    Liquidate and gift amounts over the threshold (noted 7 year taper rule applies).The taper rule is widely misunderstood.  See this thread .
    Taper relief IHT — MoneySavingExpert Forum


    Place property in offspring's name and pay market rate to remain within or don't and move out (assumed 7 year rule applies as well).

    TIA!
    The simplest way of all, is to spend enough so there is no IHT.
     DC pension pots lie outside your estate so are not counted for IHT. There is no guarantee this will last for ever.
  • Pipz
    Pipz Posts: 119 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    Brie said:
    Do the offspring want the house and to be "landlords"?  What if they get divorced and have to sell as it's their property and therefore part of the marital assets?  If you continue to live there who's responsible for maintenance and repairs?  Can they afford it?  
    Good points, ideally a generational living arrangement to provide care (if required and possible) over time. The divorce question is a good one - I assume it's better overall not to put the property in the offspring's name so it wouldn't be viewed as a marital asset in such an event.

    Brie said:
    Any gifts of cash or property will be taken into account should you need assistance with care in your advancing years.  Sounds like this may not be an issue but the local authority could still take the price of care out of the value of the gifted property and invoice whomever you gift cash to as it would be considered deprivation of assets.  Not an IHT thing of course but something to keep in mind.  
    Does the LA have a scope / range for consideration of such? E.g. if 7 years have passed since, would they still have claim?
    Fortior quo paratior
  • Pipz
    Pipz Posts: 119 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    Albermarle said:

    The simplest way of all, is to spend enough so there is no IHT.
    But in cases where property value takes one over that threshold, perhaps retain some funds to meet the IHT charge and the spend / gift all amounts over that and if gift then the 7 year would apply as amounts are over IHT threshold.
    Fortior quo paratior
  • Taper relief only applies to gifts over your NRB so you would have to give away over £325k each for that to apply and even then it only applies to the potion of the gift over that amount. Depending on what assets you liquidate CGT may be an issue. To give your home away is madness. 
  • Albermarle
    Albermarle Posts: 25,968 Forumite
    10,000 Posts Sixth Anniversary Name Dropper
    Pipz said:
    Brie said:
    Do the offspring want the house and to be "landlords"?  What if they get divorced and have to sell as it's their property and therefore part of the marital assets?  If you continue to live there who's responsible for maintenance and repairs?  Can they afford it?  
    Good points, ideally a generational living arrangement to provide care (if required and possible) over time. The divorce question is a good one - I assume it's better overall not to put the property in the offspring's name so it wouldn't be viewed as a marital asset in such an event.

    Brie said:
    Any gifts of cash or property will be taken into account should you need assistance with care in your advancing years.  Sounds like this may not be an issue but the local authority could still take the price of care out of the value of the gifted property and invoice whomever you gift cash to as it would be considered deprivation of assets.  Not an IHT thing of course but something to keep in mind.  
    Does the LA have a scope / range for consideration of such? E.g. if 7 years have passed since, would they still have claim?
    The local authority rules about deliberate deprivation of assets and the HMRC rules about IHT are separate, despite them being often linked in peoples minds. So 7 years is not relevant.
    There are guidelines for LA's to follow, but not sure that they are applied quite the same from LA to LA. Also staff shortages and inexperience may sometimes play a part.
    One main point is that the LA can take into account any asset you have given away, put in trust etc .
    However they have to show that it was done deliberately because the issue of care costs was looming on your horizon. If you gave the money away when you were fit and well/not very old then it should be OK.

    However you need to think about two points before worrying about this:
    1) The % of people going into a care home is less than most people realise, and most are only there a couple of years on average. The number of people losing their homes/life savings is a lot smaller than you would think from listening to the media, although it does happen unfortunately.
    2) If you had considerable assets would you really want to try and give them away, and then be at the mercy of which home the council could squeeze you in ?
  • What about life assurance to be payable on your death to mitigate against IHT?  Obviously depends on your age and health as to premiums.

    Prob best is to spend or gift to below threshold though I find it incredibly difficult to let go.  Other option (maybe) is to give regular monthly amounts to offspring which you can prove is not impinging on your life style i.e. out of excess income without stinging yourself.  So - if you take reular long haul holidays then suddenly only take UK holidays while doing this that may be seen as depriving yourself - just a thought.
  • eskbanker
    eskbanker Posts: 35,317 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Albermarle said:
    1) The % of people going into a care home is less than most people realise, and most are only there a couple of years on average. The number of people losing their homes/life savings is a lot smaller than you would think from listening to the media, although it does happen unfortunately.
    Media coverage can be quite distorting, but I'd contend that people funding their later life care with some or even all of their assets are using the value of homes/life savings rather than losing them as such, and wouldn't see this as unfortunate, except from the perspective of prospective legatees of course!  However, I'm conscious that other opinions are available....
  • Sea_Shell
    Sea_Shell Posts: 9,873 Forumite
    Ninth Anniversary 1,000 Posts Photogenic Name Dropper
    edited 18 August 2023 pm31 2:44PM
    How much over, ex property?


    Obviously it's much easier to "dispose" of a couple of grand, harder with 10s of thousands.


    How's it going, AKA, Nutwatch? - 12 month spends to date = 2.56% of current retirement "pot" (as at end January 2025)
  • Pipz
    Pipz Posts: 119 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    Sea_Shell said:
    How much over, ex property?


    Obviously it's much easier to "dispose" of a couple of grand, harder with 10s of thousands.


    About £100K roughly.

    I assume it's sensible to keep an liquid amount handy to cover the IHT implication of any property value that exceeds the threshold (if property is to be retained) and thereafter spend or gift as suggested.
    Fortior quo paratior
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 348.3K Banking & Borrowing
  • 252.1K Reduce Debt & Boost Income
  • 452.4K Spending & Discounts
  • 240.9K Work, Benefits & Business
  • 617.2K Mortgages, Homes & Bills
  • 175.7K Life & Family
  • 254.1K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 15.1K Coronavirus Support Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.