ISA vs SIPP - impact of IHT change

Madeinireland101

SouthCoastBoy said:

I don't see myself as wealthy, but due to combination of investments and housing I am currently in IHT territory, if counting DC pension values, by over £1m. If IHT allowances don't keep pace with inflation the situation will only get worse. 

I am bit of a quandary as I was continuing work to mainly build up the amount I can pass on as inheritance, and at the same time create a nice safety net for me and my wife, I think I now have one of two options.

Start gifting more now (but what happens if we have a 50 to 60% adjustment on the markets, I could be left short of money)

or simply stop work.

Currenty I am thinking stopping work June/July next year, and gift more over the net 10 years than I was originally planning, it's all become a bit tricky.

I favour the gift now approach as it’s good to see your children make use of the funds. If you are concerned then why not use interest free loans to your children that could morph into gifts in the future. That way you could get the capital back if you need it unexpectedly 😉

Emmia

Madeinireland101 said:

SouthCoastBoy said:

I don't see myself as wealthy, but due to combination of investments and housing I am currently in IHT territory, if counting DC pension values, by over £1m. If IHT allowances don't keep pace with inflation the situation will only get worse. 

I am bit of a quandary as I was continuing work to mainly build up the amount I can pass on as inheritance, and at the same time create a nice safety net for me and my wife, I think I now have one of two options.

Start gifting more now (but what happens if we have a 50 to 60% adjustment on the markets, I could be left short of money)

or simply stop work.

Currenty I am thinking stopping work June/July next year, and gift more over the net 10 years than I was originally planning, it's all become a bit tricky.

I favour the gift now approach as it’s good to see your children make use of the funds. If you are concerned then why not use interest free loans to your children that could morph into gifts in the future. That way you could get the capital back if you need it unexpectedly 😉

But only if the kids can repay...

Pat38493

Madeinireland101 said:

SouthCoastBoy said:

I don't see myself as wealthy, but due to combination of investments and housing I am currently in IHT territory, if counting DC pension values, by over £1m. If IHT allowances don't keep pace with inflation the situation will only get worse. 

I am bit of a quandary as I was continuing work to mainly build up the amount I can pass on as inheritance, and at the same time create a nice safety net for me and my wife, I think I now have one of two options.

Start gifting more now (but what happens if we have a 50 to 60% adjustment on the markets, I could be left short of money)

or simply stop work.

Currenty I am thinking stopping work June/July next year, and gift more over the net 10 years than I was originally planning, it's all become a bit tricky.

I favour the gift now approach as it’s good to see your children make use of the funds. If you are concerned then why not use interest free loans to your children that could morph into gifts in the future. That way you could get the capital back if you need it unexpectedly 😉

I suspect that the money has to be gifted without conditions otherwise the 7 year period has not yet started.  If you are still maintaining control of the money, it probably doesn't count as gifted for the purpose of IHT, especially if it's a written agreement.

Madeinireland101

Emmia said:

Madeinireland101 said:

SouthCoastBoy said:

I don't see myself as wealthy, but due to combination of investments and housing I am currently in IHT territory, if counting DC pension values, by over £1m. If IHT allowances don't keep pace with inflation the situation will only get worse. 

I am bit of a quandary as I was continuing work to mainly build up the amount I can pass on as inheritance, and at the same time create a nice safety net for me and my wife, I think I now have one of two options.

Start gifting more now (but what happens if we have a 50 to 60% adjustment on the markets, I could be left short of money)

or simply stop work.

Currenty I am thinking stopping work June/July next year, and gift more over the net 10 years than I was originally planning, it's all become a bit tricky.

I favour the gift now approach as it’s good to see your children make use of the funds. If you are concerned then why not use interest free loans to your children that could morph into gifts in the future. That way you could get the capital back if you need it unexpectedly 😉

But only if the kids can repay...

Ah now I suppose it depends if you ever expect them to repay - I probably don’t but it does help to protect against the situation where your partner ends up in a rogue partner position 😀

Madeinireland101

Madeinireland101 said:

Emmia said:

Madeinireland101 said:

SouthCoastBoy said:

I don't see myself as wealthy, but due to combination of investments and housing I am currently in IHT territory, if counting DC pension values, by over £1m. If IHT allowances don't keep pace with inflation the situation will only get worse. 

I am bit of a quandary as I was continuing work to mainly build up the amount I can pass on as inheritance, and at the same time create a nice safety net for me and my wife, I think I now have one of two options.

Start gifting more now (but what happens if we have a 50 to 60% adjustment on the markets, I could be left short of money)

or simply stop work.

Currenty I am thinking stopping work June/July next year, and gift more over the net 10 years than I was originally planning, it's all become a bit tricky.

I favour the gift now approach as it’s good to see your children make use of the funds. If you are concerned then why not use interest free loans to your children that could morph into gifts in the future. That way you could get the capital back if you need it unexpectedly 😉

But only if the kids can repay...

Ah now I suppose it depends if you ever expect them to repay - I probably don’t but it does help to protect against the situation where your partner ends up in a rogue partner position 😀

It also helps if you end up withdrawing a heap of tax free cash from a pension and end up with no more ISA allowance - as you can effectively use theirs as a temp measure with them keeping the interest as a reward perhaps 😀

MK62

Pat38493 said:

Madeinireland101 said:

SouthCoastBoy said:

I don't see myself as wealthy, but due to combination of investments and housing I am currently in IHT territory, if counting DC pension values, by over £1m. If IHT allowances don't keep pace with inflation the situation will only get worse. 

I am bit of a quandary as I was continuing work to mainly build up the amount I can pass on as inheritance, and at the same time create a nice safety net for me and my wife, I think I now have one of two options.

Start gifting more now (but what happens if we have a 50 to 60% adjustment on the markets, I could be left short of money)

or simply stop work.

Currenty I am thinking stopping work June/July next year, and gift more over the net 10 years than I was originally planning, it's all become a bit tricky.

I favour the gift now approach as it’s good to see your children make use of the funds. If you are concerned then why not use interest free loans to your children that could morph into gifts in the future. That way you could get the capital back if you need it unexpectedly 😉

I suspect that the money has to be gifted without conditions otherwise the 7 year period has not yet started.  If you are still maintaining control of the money, it probably doesn't count as gifted for the purpose of IHT, especially if it's a written agreement.

Quite.....if there are conditions, such as possible repayment, then it's not a gift.

Madeinireland101

Pat38493 said:

Madeinireland101 said:

SouthCoastBoy said:

I don't see myself as wealthy, but due to combination of investments and housing I am currently in IHT territory, if counting DC pension values, by over £1m. If IHT allowances don't keep pace with inflation the situation will only get worse. 

I am bit of a quandary as I was continuing work to mainly build up the amount I can pass on as inheritance, and at the same time create a nice safety net for me and my wife, I think I now have one of two options.

Start gifting more now (but what happens if we have a 50 to 60% adjustment on the markets, I could be left short of money)

or simply stop work.

Currenty I am thinking stopping work June/July next year, and gift more over the net 10 years than I was originally planning, it's all become a bit tricky.

I favour the gift now approach as it’s good to see your children make use of the funds. If you are concerned then why not use interest free loans to your children that could morph into gifts in the future. That way you could get the capital back if you need it unexpectedly 😉

I suspect that the money has to be gifted without conditions otherwise the 7 year period has not yet started.  If you are still maintaining control of the money, it probably doesn't count as gifted for the purpose of IHT, especially if it's a written agreement.

Yes I understand that but it can become a gift whenever you feel more comfortable by tearing up the load agreement and writing a suitable letter that supports its status as a gift.

MK62

Fair enough, but it only becomes a gift when the reservation of benefit is withdrawn.......and that then starts the 7 year clock. Still, I suppose the beneficiary gets use of the money in the meantime........

FIREDreamer

SouthCoastBoy said:

Start gifting more now (but what happens if we have a 50 to 60% adjustment on the markets, I could be left short of money)

or simply stop work.

This potential drop was why I annuitised 2/3 of my drawdown pot for an uncapped inflation linked joint life annuity so I could sleep at night.

This also enabled me to retire (stop work) in the summer.

Win win.

The remaining 1/3 has grown a bit but I haven’t touched it yet.

Albermarle

Pat38493 said:

SouthCoastBoy said:

I don't see myself as wealthy, but due to combination of investments and housing I am currently in IHT territory, if counting DC pension values, by over £1m. If IHT allowances don't keep pace with inflation the situation will only get worse. 

I am bit of a quandary as I was continuing work to mainly build up the amount I can pass on as inheritance, and at the same time create a nice safety net for me and my wife, I think I now have one of two options.

Start gifting more now (but what happens if we have a 50 to 60% adjustment on the markets, I could be left short of money)

or simply stop work.

Currenty I am thinking stopping work June/July next year, and gift more over the net 10 years than I was originally planning, it's all become a bit tricky.

Fair concerns, but I think there has only ever been a couple of 50-60% adjustments in markets and they always recovered within some years afterwards, so it depends how much risk you are carrying in your decumulation approach.  My thinking is that unless the whole economy completely crashes, markets must always recover sooner or later.

For the stopping work part - we should keep in mind that there is no proposal for 100% tax on anything, so a lower percentage of something is still better than nothing.

Also I heard one of those people who study social attitudes once say that for the most part, nobody considers themselves to be wealthy, but they tend to believe that everyone who is a bit richer than them is wealthy, but they are not.  Even if they double their net worth, they just redefine their definition of wealthy so that they are not  

Regarding the comment in bold, I think we can say from @SouthCoastBoy many posts, that his risk tolerance in decumulation is approximately  zero 

In line with your final paragraph, many people earning higher salaries think that what they earn is about average, even if it is say £80Kpa, because they tend to live/socialise with similar high earners.