Planning for death - forum discussion

VfM4meplse · 15 January 2017 at 10:39PM

You would have thought that death would be straightforward but it's horribly complicated. I can see why it helps to have trusted people around you.

securityguy · 15 January 2017 at 11:34PM

The problem with "trust" is that you are trusting the unknowable future.

For example, a lot of IHT-avoiding schemes involve transferring, in various ways, your assets to your children. Your children may be the finest, most honest people the world has ever seen. But marriages are not always forever, and spouses are not always well chosen, and that house that you transferred to your honest, helpful child is now an asset in a contested divorce which starts with an assumption of 50:50 division.

Other schemes involve constructing elaborate trusts, which have as their trustees some of the eventual beneficiaries of the estate, their assets some investment trusts and perhaps some IOUs from the donor, and their liabilities the obligations to the beneficiaries. Very neat. Except if the investment trusts have fallen in value at the point the donor dies, such that the trust's liabilities to the beneficiaries exceed the assets, the trustees are left personally liable for paying the beneficiaries. And if some of the beneficiaries want their money and the some of the trustees have personal assets, like houses, they had better hope they can convince the beneficiaries not to sue.

And so on. If the scheme is risk free, then it is easy for HMRC to argue that it is a transparent tax evasion scheme. If it isn't risk free, then fine, but are you really willing to take unquantifiable risks with your assets?

Yorkshireman99 · 16 January 2017 at 2:48AM

The old adage of "if it looks too good to be true then it probably is" comes to mind. Schemes promoted by some will writers that promise that will evade the need for care fees are a classic to avoid.

securityguy · 16 January 2017 at 8:18AM

Yorkshireman99 wrote: »

The old adage of "if it looks too good to be true then it probably is" comes to mind. Schemes promoted by some will writers that promise that will evade the need for care fees are a classic to avoid.

Indeed. IHT-avoidance schemes stand or fall on their detailed tax-planning status, and may or may not therefore mitigate tax. In general, the estate has the money and the onus is on HMRC to prove the tax bill and extract the money. You are still prey to the risks inherent in the scheme, but the scheme can be analysed to see whether it actually works or not (although of course the government can change the rules in a way which makes the scheme either ineffective or unnecessary or both).

However for the exotic schemes to "avoid" care home fees there is the concept of deprivation of assets which does not depend on precise details of wording, as some will-writers convince their clients, but is a general principle: if it looks like DoA, it is DoA, and it is up to you to prove it isn't. And the council have the nuclear option available of simply not paying the fees: unlike in an estate where the money is in the executor account and HMRC have to find a way to take it, the LA can just not pay the fees and leave you to convince them otherwise.

getmore4less · 16 January 2017 at 11:22AM

VfM4meplse wrote: »

Reading through this thread has left me absolutely drained. Coping with the emotional aspects of death are bad enough, I couldn't bear to leave my executor / beneficiary with a financial headache to boot. My will is going to be more complicated than I had originally thought so I need to make sure everything is covered

Just to check: can life interest gifts be made to any beneficiary? All the examples I have seen relate to spouses / tenants in common.

Anyone can be left a life interest in anything.
You have to be careful as the IHT trail is not always obvious.

Life interest(interest in possession trusts) are nearly always assets for IHT purposes.

One feature of spouse life interest is it is IHT exempt on your estate when creates (becoming an IHT liability on the spouse estate) but not actually owned by them for other things like care fess(a common reason to use them).

With a non spouse life interest it uses up nil rate band and is an IHT liability on both estates

if planning to do this before you die even more complicated.

definitely worth some research in advance of obtaining professional advice.
An IIP may not be the only or best option to achieve your goals.

VfM4meplse · 16 January 2017 at 9:27PM

getmore4less wrote: »

Anyone can be left a life interest in anything.
You have to be careful as the IHT trail is not always obvious.

Life interest(interest in possession trusts) are nearly always assets for IHT purposes.

One feature of spouse life interest is it is IHT exempt on your estate when creates (becoming an IHT liability on the spouse estate) but not actually owned by them for other things like care fess(a common reason to use them).

With a non spouse life interest it uses up nil rate band and is an IHT liability on both estates

if planning to do this before you die even more complicated.

definitely worth some research in advance of obtaining professional advice.
An IIP may not be the only or best option to achieve your goals.

Funny, I struggle to trust "independent" insurance brokers from bitter experience.

My draft will is complete and needs looking over, I've also written a letter of wishes. I just need to work out a notional IHT liability and then arrange enough life insurance to allow it to be paid out and free up my estate. Easier said than done because NRB has in no way kept up with property prices. I always thought that I wouldn't care when I'm dead but suddenly it is important that my home is passed down as a family residence rather than sold off to pay the state.

I still feel bad for my executors but I am being as organised as I can so at least I won't be cursed after death

troubleinparadise · 16 January 2017 at 9:44PM

VfM4meplse wrote: »

Funny, I struggle to trust "independent" insurance brokers from bitter experience.

My draft will is complete and needs looking over, I've also written a letter of wishes. I just need to work out a notional IHT liability and then arrange enough life insurance to allow it to be paid out and free up my estate. Easier said than done because NRB has in no way kept up with property prices. I always thought that I wouldn't care when I'm dead but suddenly it is important that my home is passed down as a family residence rather than sold off to pay the state.

I still feel bad for my executors but I am being as organised as I can so at least I won't be cursed after death

Then leave them a sum of money in consideration for their ongoing goodwill despite the task you have left for them to do.

VfM4meplse · 16 January 2017 at 9:49PM

troubleinparadise wrote: »

Then leave them a sum of money in consideration for their ongoing goodwill despite the task you have left for them to do.

Not necessary as the main executor is also the residual benficiary.

Malthusian · 17 January 2017 at 1:27PM

VfM4meplse wrote: »

I just need to work out a notional IHT liability and then arrange enough life insurance to allow it to be paid out and free up my estate. Easier said than done because NRB has in no way kept up with property prices. I always thought that I wouldn't care when I'm dead but suddenly it is important that my home is passed down as a family residence rather than sold off to pay the state.

Make sure if you arrange insurance that the premiums are guaranteed for the whole of your life. Whole of life insurance has a bad reputation, partly justified, because of the number of people that do it on the cheap by taking out a policy which has a lower cost initially but where the insurer can increase the premium at its discretion at a later date (e.g. 5 years on). Inevitably as they get older the cost becomes stratospheric, so they cancel it, and they lose all their premiums plus they no longer have cover against IHT.

Has the beneficiary told you they want to live in your house after you are gone (or are they living with you now)? I ask out of interest because people seem to decide they want their heirs to live in their "family home" far more often than the heirs do.

VfM4meplse · 17 January 2017 at 1:44PM

Malthusian wrote: »

Has the beneficiary told you they want to live in your house after you are gone (or are they living with you now)? I ask out of interest because people seem to decide they want their heirs to live in their "family home" far more often than the heirs do.

No, I would like them to benefit from the property in whatever way they choose (aside from selling it) before its passed down to the next generation. Renting it out is fine if that is what they choose to do.

I have just discovered that the Which? online will writing service does not offer a template that covers life interest gifts, so my free typed wishes have no legal basis. Feels like a big waste of time.

What are my options? I've looked at MSE Martin's article, and won't qualify for many of the charitable schemes on the basis of age. I realise that anything offered with a nominal charge is likely to be as simple as Which? but being able to make life interest gifts is a non-negotiable for me.

Can anyone recommend a reliable will-writing solicitor in East London / Essex? By reliable I mean easy to execute after death (ie not confounded by a technical impediment as opposed to contested on some other grounds), rather than in creation.

Planning for death - forum discussion

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