IHT - At what age should you start to take it seriously?
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Sea_Shell
Posts: 9,441 Forumite
in Cutting tax
Just wondered, at what age do you start to seriously consider your estates IHT position, and start to do something about it.
Currently as a couple (47/52) we have a joint net worth of £850,000, no children. (This includes our house and DC pension pots) So if something were to happen to us both in the short term IHT would be payable, on second death, on £200k. £80,000 = quite a bill. Although we realise it wouldn't be our problem, but that of our heirs!!!
In addition to this, we still are lucky to have all 4 of our parents, so have not received any inheritances ourselves yet (if we get any at all, of course, it's not a given) - so would potentially look to DoV these straight to N&N's depending on the circumstances at the time.
Obviously we are, at the moment too young to consider starting to gift any money away (to N&Ns) as we'll need a substantial amount of that money to live on over the next (hopefully) few decades and you never know when you might need larger chunks of cash to deal with serious health issues, emergencies or care. So...
When do you consider the optimum age to start making any gifts? 60, 70, 80 ???
Is it something that you just take a "suck it and see" approach with, as the years go by, and re-assess on, say, an annual basis?
Have you started IHT planning, and how old are you?
Have you DoV'd any inheritance you have received, onwards?
Is there anything else I haven't thought of, or considered?
Be interested in hearing peoples plans, or action they've already taken. Thanks.
Currently as a couple (47/52) we have a joint net worth of £850,000, no children. (This includes our house and DC pension pots) So if something were to happen to us both in the short term IHT would be payable, on second death, on £200k. £80,000 = quite a bill. Although we realise it wouldn't be our problem, but that of our heirs!!!
In addition to this, we still are lucky to have all 4 of our parents, so have not received any inheritances ourselves yet (if we get any at all, of course, it's not a given) - so would potentially look to DoV these straight to N&N's depending on the circumstances at the time.
Obviously we are, at the moment too young to consider starting to gift any money away (to N&Ns) as we'll need a substantial amount of that money to live on over the next (hopefully) few decades and you never know when you might need larger chunks of cash to deal with serious health issues, emergencies or care. So...
When do you consider the optimum age to start making any gifts? 60, 70, 80 ???
Is it something that you just take a "suck it and see" approach with, as the years go by, and re-assess on, say, an annual basis?
Have you started IHT planning, and how old are you?
Have you DoV'd any inheritance you have received, onwards?
Is there anything else I haven't thought of, or considered?
Be interested in hearing peoples plans, or action they've already taken. Thanks.
How's it going, AKA, Nutwatch? - 12 month spends to date = 2.38% of current retirement "pot" (as at end April 2024)
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Comments
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Don't forget pensions are outside your estate for IHT, so that may bring down your bill substantially.0
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Marriage makes a significant difference to the plans
lets go with married.
With no kids the zero sum game is the the potential goal.
You build it up then run it down.
life expectancy is the tough one(my family tend to be 70/80 the OH 90's)
I worked on the idea that a lot of discretionary spends would run down as I got older and things like mobility reduced(eg.fewer holidays).
If we can make the high spend years till 80 that will probably do us might change my mind when I hit 70s
You can do some simple projections to decide when the transition takes place from saver to spender.
what's the target give up working 55,60 or later...
There may be a intermediate period where you stop accumulation and start spending income but not the pot.
other "how much do i need" strategies, like once retired maybe 1 new car every 10 years but you may stop driving at some point.
If you work on you can at least keep up with inflation, at 60 you buy one car and have £20k put to one side for the last 2 that take you to 90.
Do that for other things like how many holidays a year
With an asset such as a house there is always the option to cash that in later if money starts to run out.
The big problem can be if the house is a significant portion of the nil rate bands(£650k) you still need a lot of cash to live off( be it saving or unearned income like pensions) for 20-30 years
I would look at upping the spending as well as gifting.
You don't have enough yet to start giving it away.
You need to work on a pot of 20-25 times your spends.
ie. If you think you can live on £20k a year that's £400k-£500k + your house paid off.0 -
The simplest and most effective way to manage IHT is to spend and give away your wealth.
Also as said, it doesn't include pensions so you are likely any nowhere near it at the moment anyway.
I don't know how close you are to your Nephews and nieces but unless it's your children I'd not be considering it, Id spend as suits your circumstances without regards to IHT.
Should you in future become the beneficiary of really big legacies then at that point consider deeds of variation to pass it Direct instead to the n&n's, though of course the spectre of care home costs, low odds but large fees, is always there.0 -
I would agree with the others, be generous to yourselves, and try not to die leaving too much unspent.
If not already done, prioritise getting up to date wills and LPAs in place.0 -
You could give the guide on IT planning a read for some general tipsInheritance Tax
Plan to legally save £100,000s on your estate
https://www.moneysavingexpert.com/family/inheritance-tax-planning-iht/0 -
PS to answer one of your Q's yes I will be DOVing an inheritance to my kids and grandkids. I don't need it.0
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With no children I would not worry about reducing IHT. Keep it all, you might need it.
A nice care home near where I live which, I considered for my mother, was £1,500 per week and at that rate you can soon burn through £100,000's0 -
I would start giving money away when you are sure you will not need it yourself for living expenses and possible care home costs (maybe 10 years in total to cover both of you). I started doing that 3 years ago at age of 67. I suspect most can do that equation after they have retired and in receipt of pensions.
Of course we may need nothing like 10 years of care home and our estate will end up paying IHT but if that is the case our beneficiaries will still a nice sum and I would preferred to have payed the HMRC than needed a lot of care.0 -
Thanks all. Yes, we are married.
Regards pensions, I realise that on first death they pass outside of the estate, but what about after 2nd death. Surely if the pension pot was paid out on first death it then just becomes a cash asset of the surviving spouse, or is it inherited within a pension wrapper, like an ISA??How's it going, AKA, Nutwatch? - 12 month spends to date = 2.38% of current retirement "pot" (as at end April 2024)0 -
Yes, ideally we'd just leave a note saying "sorry, there is no money left" !!!
But, if investments and house prices continue to perform well, they might actually outpace our spending!!! We've never really been spenders....so it's an adjustment we need to make!
DH has already retired (at 48) and I plan to later this year!!How's it going, AKA, Nutwatch? - 12 month spends to date = 2.38% of current retirement "pot" (as at end April 2024)0
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