Inheritance tax thoughts

Dinloo

Hello, Ive been researching inheritance tax and have given myself a headache. My house and saving are about 750k. I’m not married and have 2 children who are adults. My partner lives with me. I own the house. I know I have a personal allowance of 325k and residence if passed to children of 175k so 500 in total. I would like to reduce my possible inheritance tax. I know I can gift mo ey to my children/partner and need to live for 7 yrs and can make some other lower value gifts. I have read about how a trust might be helpful but not sure what type of trust I should look into. Also can a trust really help if set up correctly. I will seek proper guidance but want to have my own understanding so I can list questions to make sure I’m making the right decision. So any thoughts on my options would be great thanks. I’m not looking to cut out possible care fees if required and am just looking to have my finances in order that will give loved ones the most when I pop off. Thanks

Westertonbilly

Get married?

lisyloo

I thought that was a bit tongue in cheek but it's a great idea. Ken Dodd got married 2 days before his death avoiding an IHT bill of £11 million

km1500

I would avoid trusts etc they tend to go wrong in a big way

if you don't want to get married then the best thing to do is to give some away now and hope that you live seven years. you've got nothing to lose because even if you don't last seven years you are in exactly the same position as if you didn't give it away

MarzipanCrumble

Life Assurance?  Get married is def the first option, but if you are not in a position or are wary of giving away and are healthy (and I suppose not too old) consider LA to mitigate IHT tax, in that it falls out of your estate and your executor can pay the tax with it.

Dinloo

Thanks all. Marriage is not what we would want and I guess there is a potential risk of my children being disinherited. LA could prove expensive but will look into that. I also guess with my partner being in my will that reduces the 175 residence element. I don’t know anywhere near enough re trusts and I’m cautious of leaving a nightmare. Gift some chucks of money and hoping for 7 yrs and spending the rest looks favourable and hope the IHT rules change for the better. Ta

RAS

You need to talk to a STEP solicitor, because if you marry, sever the tenancy and leave your half to your kids with a post-death trust, you kids would have to wait but wouldn't be disinherited. And depends if your partner is much younger, in good health etc.

Keep_pedalling

Getting married makes sense if the OP plans to make substantial gifts to their partner. 

Dinloo

Thanks all. Marriage is not really an option or not at this time. It also brings in things like divorce etc and the complexities that go with that. Hopefully I’ve another 10-15 yrs ahead of me and I do plan to spend savings living life. If I get ill, then marriage might be the then solution but does that not then shift an inheritance issue to my partner/wife when they die (that is if I go first). I guess if I gift money to my children who put it in savings after 7 yrs all is good and they could then use that money how they wish. Some kind of trust for the house needs to be researched so what type of trust is considered for homes thanks.

Dinloo

Further to this. If I was to marry and I die first iht allowance is 1m. What happens when my say wife dies is iht still 1m or is the surviving person’s allowance set back to a single persons 325. Thanks

Keep_pedalling

Dinloo said:

Thanks all. Marriage is not really an option or not at this time. It also brings in things like divorce etc and the complexities that go with that. Hopefully I’ve another 10-15 yrs ahead of me and I do plan to spend savings living life. If I get ill, then marriage might be the then solution but does that not then shift an inheritance issue to my partner/wife when they die (that is if I go first). I guess if I gift money to my children who put it in savings after 7 yrs all is good and they could then use that money how they wish. Some kind of trust for the house needs to be researched so what type of trust is considered for homes thanks.

There is no need for people who are gifted money to keep it in savings for 7 years, any IHT due on an estate is paid from the residual estate not clawed back from the gifts. The only time that would happen is if you gave so much away there was not enough left to pay the tax. 

The only sort of trust to consider is an immediate post death interest trust (IPDIT) , which would give a surviving partner the right to live in your home for as long as they need with it then passing to your children.