General financial advice & Query

eric4395

Wife and I are both 70 retired house our own  worth about (£150,000 today), no mortgage or debt and seem to be in good health at the moment.
We both have our gov pension and wife gets a small monthly works pension.
I have DC works pension of approx £600,000 haven't touched it so I am entitled to my 25% tax free ( £125,000).
We also have savings in ISAs and shares of well over £300,00. 
We have 2 children in there 40's and 3 grandchildren 22,18 & 7 years. 
With all the hullaboo about IHT etc and changes in 2027 we are wondering best steps to take.We have our wills made out to children/ grandchildren & power of attorney set up, so that's all sorted. We do spend our money B4 we start getting lectures😊, holidays, family holidays house improvements and monetary gifts to our family, we are happy where we are.
However we believe we will probably be able to live of our savings for the rest of our lives, so would it make sense to use the pension tax free money over the next few years and give it to our son & daughter to use in ISAs for themselves at £20,000 each every year till the tax free sum is used up. 
The First 20 grand each being there's to spend as they wish with the rest still being ours to spend if we really needed to but can make these decisions as the years roll on and we see where we are with our savings. 
We are obviously hoping at least one of us lasts another 7 years which is the guidelines regarding gifting?so obviously best to think about this now rather than in a few years.
We have no reservations about any problems doing this as they wouldn't touch it without us saying they could and eventually it would be there's anyway unless we spent all our savings or lived healthily way longer than we thought.
I know it's protected in my pension as it stands but I feel leaving it without touching it for say  another 10 years just means yes it will probably be way more than 600,000 but it's going to be heavily taxed when they start to withdraw any money from it (also maybe IHT involved) they will prob be in there 50' s by then. Surely you want your family to enjoy & spend it now rather than later and it would make a big difference to them at present.
What's everyone's views and am  I being sensible in my thinking here. Thanks for any comments and viewpoint.

eskbanker

eric4395 said:

However we believe we will probably be able to live of our savings for the rest of our lives, so would it make sense to use the pension tax free money over the next few years and give it to our son & daughter to use in ISAs for themselves at £20,000 each every year till the tax free sum is used up. 
The First 20 grand each being there's to spend as they wish with the rest still being ours to spend if we really needed to but can make these decisions as the years roll on and we see where we are with our savings. 

Are you talking about gifting the money to your children (in which case it's theirs to do with as they wish, with no permission needed) or some sort of conditional loan or custody arrangement?

Marcon

eric4395 said:

Wife and I are both 70 retired house our own  worth about (£150,000 today), no mortgage or debt and seem to be in good health at the moment.
We both have our gov pension and wife gets a small monthly works pension.
I have DC works pension of approx £600,000 haven't touched it so I am entitled to my 25% tax free ( £125,000).
We also have savings in ISAs and shares of well over £300,00. 
We have 2 children in there 40's and 3 grandchildren 22,18 & 7 years. 
With all the hullaboo about IHT etc and changes in 2027 we are wondering best steps to take.We have our wills made out to children/ grandchildren & power of attorney set up, so that's all sorted. We do spend our money B4 we start getting lectures😊, holidays, family holidays house improvements and monetary gifts to our family, we are happy where we are.
However we believe we will probably be able to live of our savings for the rest of our lives, so would it make sense to use the pension tax free money over the next few years and give it to our son & daughter to use in ISAs for themselves at £20,000 each every year till the tax free sum is used up. 
The First 20 grand each being there's to spend as they wish with the rest still being ours to spend if we really needed to but can make these decisions as the years roll on and we see where we are with our savings. 
We are obviously hoping at least one of us lasts another 7 years which is the guidelines regarding gifting?so obviously best to think about this now rather than in a few years.
We have no reservations about any problems doing this as they wouldn't touch it without us saying they could and eventually it would be there's anyway unless we spent all our savings or lived healthily way longer than we thought.
I know it's protected in my pension as it stands but I feel leaving it without touching it for say  another 10 years just means yes it will probably be way more than 600,000 but it's going to be heavily taxed when they start to withdraw any money from it (also maybe IHT involved) they will prob be in there 50' s by then. Surely you want your family to enjoy & spend it now rather than later and it would make a big difference to them at present.
What's everyone's views and am  I being sensible in my thinking here. Thanks for any comments and viewpoint.

Are you factoring in the possibility of needing care in later life?

If you are sure you can afford to give away funds now, then it makes sense to consider doing so/how much you can afford to give away, both to enhance your children's lives now and to avoid IHT in the future.

DRS1

Based on those figures if you both dropped dead tomorrow there'd be very little IHT to pay (well none because the IHT for pensions changes won't have happened but even if they had still you are only marginally over the £1 million mark).  Maybe you have other assets.  Or maybe your wills don't leave everything to the surviving spouse and then to the kids on the second death?
And lifetime giving to your kids is fine if that is what you want to do but remember that until 2027 what is in your pension is outside the IHT net.  If you take the lump sum out now it is in your estate now - until you give it away.  You could draw the lump sum in chunks of £40k a tax year I suppose.
Do your kids already fill their ISAs? 
What about giving to the grandkids?
What is this about: We have no reservations about any problems doing this as they wouldn't touch it without us saying they could and eventually it would be there's anyway ?  If you have given the money away you cannot determine what happens with it afterwards.  There is no eventually about it.  It is theirs immediately and if they want to blow it all on black in Monte Carlo then they can.  If you try to restrict them then you risk being treated as never having given the money away at all so it will have been a waste of time.

DRS1

Just twigged that your house is worth less than the combined Residential nil rate bands so the £1million figure may be less for you.  (£800k?) Sorry.

Roger175

DRS1 said:

Based on those figures if you both dropped dead tomorrow there'd be very little IHT to pay (well none because the IHT for pensions changes won't have happened but even if they had still you are only marginally over the £1 million mark).  Maybe you have other assets.  Or maybe your wills don't leave everything to the surviving spouse and then to the kids on the second death?
And lifetime giving to your kids is fine if that is what you want to do but remember that until 2027 what is in your pension is outside the IHT net.  If you take the lump sum out now it is in your estate now - until you give it away.  You could draw the lump sum in chunks of £40k a tax year I suppose.
Do your kids already fill their ISAs? 
What about giving to the grandkids?
What is this about: We have no reservations about any problems doing this as they wouldn't touch it without us saying they could and eventually it would be there's anyway ?  If you have given the money away you cannot determine what happens with it afterwards.  There is no eventually about it.  It is theirs immediately and if they want to blow it all on black in Monte Carlo then they can.  If you try to restrict them then you risk being treated as never having given the money away at all so it will have been a waste of time.

I think what the OP is saying is that he trusts his family sufficiently that they would respect the reason for the gift and wouldn't spend the money with until it was agreed. Certainly, we have this sort of relationship with our kids and I would stake my lift on being able to enter into such and arrangement and be totally confident that they could be trusted.

I know this isn't necessarily a given, but some families do have this sort of relationship, in fact we have some money inside our savings accounts which is there under a similar agreement with my mother-in-law. When my late father-in-law died 6 years ago, he requested his personal assets be put into trust for his daughters, but the Solicitor involved made such a pigs ear of trying to deal with it that we just dumped him and MIL put the funds across to her daughters on the basis that is was theirs unless she ever needed it for emergency purposes (she won't, as she's got enough for almost every contingency), but we've kept it ringfenced and would willingly let her have it if she truly needed it. Another year and it will be past the 7 years for gifting purposes.

QrizB

Roger175 said:

... MIL put the funds across to her daughters on the basis that is was theirs unless she ever needed it for emergency purposes (she won't, as she's got enough for almost every contingency), but we've kept it ringfenced and would willingly let her have it if she truly needed it. Another year and it will be past the 7 years for gifting purposes.

If it's "on the basis that is was theirs unless she ever needed it" then it's potentially not theirs, it's hers. The 7 years might not have started yet.

Brie

What about putting things into joint accounts? 

My mom & MiL both did this and so on death the ££ then belonged to the other person named on the account.  With my mom it was with the understanding that the money was hers for her care which reduced the accounts a bit.  With MiL it was so that my OH could pay bills and buy her (& him) some treats.  Treats being MiL saying "why not take out £100 and buy that car you were thinking about" so instead he'd take out £10 to buy a book he wanted to read.  

AlanP_2

You haven't said how much your State Pension is but it's worthwhile taking taxable money from your DC pot up to the level of your personal allowance as it will get at 0%. 

Until the money is withdrawn it all belongs to you and not to your wife as pensions are individually owned.

I say this because it will possibly help your/her executors to prove dates of gifting from BOTH of you at some stage in the future. An explicit gift out of the withdrawn funds to your wife if she has a separate account may help with that.

eric4395

Roger175 said:

DRS1 said:

Based on those figures if you both dropped dead tomorrow there'd be very little IHT to pay (well none because the IHT for pensions changes won't have happened but even if they had still you are only marginally over the £1 million mark).  Maybe you have other assets.  Or maybe your wills don't leave everything to the surviving spouse and then to the kids on the second death?
And lifetime giving to your kids is fine if that is what you want to do but remember that until 2027 what is in your pension is outside the IHT net.  If you take the lump sum out now it is in your estate now - until you give it away.  You could draw the lump sum in chunks of £40k a tax year I suppose.
Do your kids already fill their ISAs? 
What about giving to the grandkids?
What is this about: We have no reservations about any problems doing this as they wouldn't touch it without us saying they could and eventually it would be there's anyway ?  If you have given the money away you cannot determine what happens with it afterwards.  There is no eventually about it.  It is theirs immediately and if they want to blow it all on black in Monte Carlo then they can.  If you try to restrict them then you risk being treated as never having given the money away at all so it will have been a waste of time.

I think what the OP is saying is that he trusts his family sufficiently that they would respect the reason for the gift and wouldn't spend the money with until it was agreed. Certainly, we have this sort of relationship with our kids and I would stake my lift on being able to enter into such and arrangement and be totally confident that they could be trusted.

I know this isn't necessarily a given, but some families do have this sort of relationship, in fact we have some money inside our savings accounts which is there under a similar agreement with my mother-in-law. When my late father-in-law died 6 years ago, he requested his personal assets be put into trust for his daughters, but the Solicitor involved made such a pigs ear of trying to deal with it that we just dumped him and MIL put the funds across to her daughters on the basis that is was theirs unless she ever needed it for emergency purposes (she won't, as she's got enough for almost every contingency), but we've kept it ringfenced and would willingly let her have it if she truly needed it. Another year and it will be past the 7 years for gifting purposes.

That's exactly what I meant , sounds as if some people wouldn't trust there own son or daughter in this scenario, I explicitly trust mine and once it's in there bank account then it doesn't belong to me anymore, true but it would always be there if I needed it im confident of that?

eric4395

AlanP_2 said:

You haven't said how much your State Pension is but it's worthwhile taking taxable money from your DC pot up to the level of your personal allowance as it will get at 0%. 

Until the money is withdrawn it all belongs to you and not to your wife as pensions are individually owned.

I say this because it will possibly help your/her executors to prove dates of gifting from BOTH of you at some stage in the future. An explicit gift out of the withdrawn funds to your wife if she has a separate account may help with that.

My state pension is the full state pension + a protected payment which takes me above the £12,570 so I expect a letter from HMRC looking to tax me on the excess.