Is there a legal way in avoiding paying IHT on your property?

UnsureAboutthis

I've been reading the web, on and off for over a year re this subject, but I am still confused.

As things stand, I was staggered to find out a property on our road sold for approx 1.1 million.
We bought our home in the middle of a major financial crash, ie 2009 and go a lot of our money. We bought wisely, a really nice area and a property that needed total refurbishment. for almost 700k inc stamp etc and spent loads on it.
Our children, five of them all moved out years ago, bar one who moved out this year to her own place,

Is there a legal way as things stand to reduce IHT. We have shares and they vary between 80 to 110k this year. We also have savings and jewellery.

I've read about 'Trusts' but I can never get my head around it and I also fear that they may be gimmicks. 

This year we gifted 12k to our children and grandchildren, ie used up the previous year's gift, tax allowance. I'm also aware about the 250-pound gifts person person/s that had not got part of the main gift/s. We are also aware about the spend on weddings, etc and tax exceptions.

Any ideas? Thank you.

Emmia

Gifts out of excess income? - e.g. you earn 4k per month, spend 2.5k and put the other 1.5k in savings - some of that 1.5k could be gifted on a monthly basis. 

To note, you can't live off your savings if doing this, you need to essentially carry on spending as you are. And I would ensure there is a letter setting out how you're gifting to the beneficiary(s)

In terms of your property though, you'll find many threads on why Trusts are to be avoided - principally around the fact that you may need the money tied up in your house to pay for care.

Keep_pedalling

Reducing IHT when most of your assets are tied up in your home is difficult, so the best option now that the children have all left nome is to downsize and make some larger gifts from the equity that you release. You have to live another seven years before those gifts fall out of your estate but if you are reasonably good health you can cover the IHT that would occur from an unfortunate early demise. 

As for putting your home in trust you instinct is correct just don’t go there. 

kempiejon

The way to avoid taxes is to use allowances. I reduced my taxable income below the income tax level, I don't pay income tax. I never sell more than capital  allowance on my shares. Trouble with houses they are just too big and at £350k per could since 2021 the allowance isn't growing. Sell the house, remortgage? Then gift. If you've good health and longevity you can gift over £3k each per year, sooner the better.
If it's just to avoid the bill you can take insurance - ensure the pay out is outside the estate for inheritance purposes. 
I like to comment that by getting rid of money you remove liability to pay tax on it.

Flugelhorn

downsize, invest the money and definitely give gifts out of excess income, save for the IHT bill (!)  and give larger gifts (with the caveat of living 7 years longer). 

Albermarle

UnsureAboutthis said:

I've been reading the web, on and off for over a year re this subject, but I am still confused.

As things stand, I was staggered to find out a property on our road sold for approx 1.1 million.
We bought our home in the middle of a major financial crash, ie 2009 and go a lot of our money. We bought wisely, a really nice area and a property that needed total refurbishment. for almost 700k inc stamp etc and spent loads on it.
Our children, five of them all moved out years ago, bar one who moved out this year to her own place,

Is there a legal way as things stand to reduce IHT. We have shares and they vary between 80 to 110k this year. We also have savings and jewellery.

I've read about 'Trusts' but I can never get my head around it and I also fear that they may be gimmicks. 

This year we gifted 12k to our children and grandchildren, ie used up the previous year's gift, tax allowance. I'm also aware about the 250-pound gifts person person/s that had not got part of the main gift/s. We are also aware about the spend on weddings, etc and tax exceptions.

Any ideas? Thank you.

You can give away a lot more than these allowances.
If you die > 7 years after the gift, then the gift is not included in any IHT calculations.
If you die within 7 years, it will be counted, but you ( or more correctly your estate), will only be back where you started. You can not pay more IHT by giving money away.

Also as a married couple, only the second death is relevant for these rules ( I think ) .

Are you aware that money in an unused DC pension pot is not currently included in your estate?

Are you aware that gifts to charity are exempt from IHT and a big enough gift will actually reduce the 40% payable to 36%?

lincroft1710

There was a way of avoiding IHT or Estate Duty as it was then but it was rather drastic. When i was in the VOA and we were disposing of old records I came across a few "KIW" ED cases. Apparently if an individual was Killed In a War, the estate was exempt from Estate Duty.

EnPointe

UnsureAboutthis said:

I've been reading the web, on and off for over a year re this subject, but I am still confused.

As things stand, I was staggered to find out a property on our road sold for approx 1.1 million.
We bought our home in the middle of a major financial crash, ie 2009 and go a lot of our money. We bought wisely, a really nice area and a property that needed total refurbishment. for almost 700k inc stamp etc and spent loads on it.
Our children, five of them all moved out years ago, bar one who moved out this year to her own place,

Is there a legal way as things stand to reduce IHT. We have shares and they vary between 80 to 110k this year. We also have savings and jewellery.

I've read about 'Trusts' but I can never get my head around it and I also fear that they may be gimmicks. 

This year we gifted 12k to our children and grandchildren, ie used up the previous year's gift, tax allowance. I'm also aware about the 250-pound gifts person person/s that had not got part of the main gift/s. We are also aware about the spend on weddings, etc and tax exceptions.

Any ideas? Thank you.

OP are you are in married / civil partnership couple ?  if so don't forget aobut the  transfer  of  allowances  between spouses  ( 325 k  each) and the 'double'  main /principal residence (175k each)   exemption  which  takes the best part of a 1million GBP of an estate out of IHT ... 

certainly  gifiting  without impacting on your standard of living  is not  an issue , especially if the pattern is established while you  are well -  as the deprivation of assets provisions with regard to care fees  is  often the main concern there 

Grumpy_chap

The answer to the OP's question is to spend all the money on enjoying life to the full while fit and able and then ensuring the best possible care in later life if health declines.

theoretica

Also, anything over the IHT limit given to charity doesn't attract IHT.  Avoids IHT, if that is really what you want to do, but doesn't maximise your children's inheritance if that is what you actually meant.

UnsureAboutthis

Many thanks to everyone that has helped.