General financial advice & Query

Sarahspangles

eric4395 said:

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?

Unfortunately it’s not just about trust. You also need to be confident your offspring are good with money, will never divorce, and are guaranteed not to predecease you.

DRS1

eric4395 said:

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?

I was not talking about the sort of relationship you have with your kids.  I am talking about what is a gift and what is not.  If it has strings attached then it is not a gift.  Now you may "get away with it" because you have not imposed any strings which anyone can prove (eg drawn up a Deed of Gift saying "here is £x but you can't spend it and if I need it for any reason you will pay it back to me on demand") and your kids/executors are not likely to tell HMRC that there were any strings.  But this is not the sort of thing you be should be saying about money you are giving away.

Albermarle

eric4395 said:

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?

I trust mine as well, but then you also have to trust any partners they have ( and maybe their relatives or any children the may have).
Also that partner may move on/ have a fatal accident and/or your offspring maybe have mental problems with an illness. 
I think it is fine to make these decisions based on trust, but best also to keep eyes wide open, and be aware that there maybe unexpected future developments. 
To quote Donald Rumsfeld.
there are known knowns; there are things we know that we know. There are known unknowns. That is to say, there are things that we now know we don't know. But there are also unknown unknowns. There are things we do not know we don't know.

eric4395

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.

Ps misprint  savings meant to say over  £300,000 

eric4395

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.

No other assets, The children dont have any isas set up , Our wills leave to our chidren and a  shared % to the grandchildren.. We have already gave 4 lump sums of £4000 to the 22 year old totalling £20,000 with the goverrment adding another £1000 each year( into a lisa) and was therefor able to put a deposit on his first house just last month , the 18 year old  we have gave him his first £ 4000 with 3 other instalments over the next 3 years so he will then be in the same position with £20, 000 + available in his lisa.
The 7 year old we are looking at  opening a jisa for her with the max amount of £9000 from us however our son will have to set it up first before we can contribute . Your last point wont happen  although i take inboard everything that other posters have referred to on the perhaps danger of doing this.

eric4395

There seems to be a few reservations regarding what i thought i should do  in  my current financial situation, am i allowed to ask on this forum what other suggestions would be if you were in  the same situation, which i am sure many are. Am i right in saying as it stands even under IHT changes in 2027 it shouldnt effect me unless i came into winning the lottery etc or my pension somehow doubled before we passed away. , or the gov moved the goalposts again?

Roger175

We're not in a dissimilar position, albeit 10 years younger. By that I mean we are comfortably living off my wife's small DB pension and savings and apart from drawing sufficient to optimise the tax-free amount, we potentially won't need to touch my DC pension for a very long time, if at all.

The budget has made us reconsider things and we are now beginning to think very differently about IHT. There is no point in our kids having to suffer the loss and so we are now thinking about gifting far more at an earlier stage and also, we've decided to fund a big family ski holiday next winter. Whilst we're keen to avoid the IHT, the effect of earlier gifting and actually spending what we've saved is probably going to help HM Treasury in other ways. Not a bad thing really!

Shadyocuk

I think most posters were just making sure you understood that once a "gift" is given it is never 100% that you could get it back , Deaths, Divorce , Banckruptcy , loss of job/ illness that could mean the recipients are forced to live of the money as they are not able to claim benefits(and cant give you the money back due to deprivation of captial rules) , breakdown of relationship between parents and children etc etc. 

Honestly if I was in your position I would probably do as you intend and get the enjoyment of watching the children/grandchildren living better than they otherwise would.