[Politics] Inheritance Tax

[jessiejames]

I don’t know about selling the property under market value (probably not wise, bound to be some rules around it) but if the house is sold, the first thing that will happen is the mortgage would be repaid, with the balance then going to the estate for distribution in accordance with the will. If it’s been left to you, you are able to gift it onwards but will need a solicitor to talk you through the mechanics. If they want to keep the property they can pay the mortgage off (if necessary by taking out a new mortgage).

20 years ago my parents offered me and the wife the house for £50k. Trying to get a solicitor to take on our "at arms length sale" was a nightmare,thats why we all decided to pull out. Mum and dad then had the £90k lifetime mortgage and up until Covid were having 3 to 4 holidays away. Good luck to them i say.

Slightly off topic bbut when my dad passed he had no bank account and the only asset was the house thatnow becomes my mums, his state and private pension went to the care home, however my mum has a £2k bill for the 6 weeks before the care home had his pensions from BHCC, Can they claim this?

 

[dazzer6666]

20 years ago my parents offered me and the wife the house for £50k. Trying to get a solicitor to take on our "at arms length sale" was a nightmare,thats why we all decided to pull out. Mum and dad then had the £90k lifetime mortgage and up until Covid were having 3 to 4 holidays away. Good luck to them i say.

Slightly off topic bbut when my dad passed he had no bank account and the only asset was the house thatnow becomes my mums, his state and private pension went to the care home, however my mum has a £2k bill for the 6 weeks before the care home had his pensions from BHCC, Can they claim this?

Not sure on the care home fees but if he owned the house, quite likely that he was technically liable for the cost - although potentially complicated if someone else was living in the house. There’s usually some kind of ‘funding agreement’ put in place when someone enters care which should have covered this. If not, it’s probably something else to ask a solicitor but in the meantime I’d probably be telling the care home there’s no money, he only had the property and there won’t be any cash until it’s sold…….

 

[jessiejames]

Not sure on the care home fees but if he owned the house, quite likely that he was technically liable for the cost - although potentially complicated if someone else was living in the house. There’s usually some kind of ‘funding agreement’ put in place when someone enters care which should have covered this. If not, it’s probably something else to ask a solicitor but in the meantime I’d probably be telling the care home there’s no money, he only had the property and there won’t be any cash until it’s sold…….

Its Brighton & Hove council asking for it.

 

[dazzer6666]

Its Brighton & Hove council asking for it.

Same applies…….

 

[Colonel Mustard]

….
Having said that any estate that ends up paying IHT when there are so many ways of avoiding this is likely to remain very low.

Are there that many ways of avoiding IHT? I don’t see how we can avoid it really, apart from leaving a big chunk to charity. We don’t have kids, and gifting cash (and hoping you live 7+ years) is risky if, like my wife, you worry about care home fees and other unexpected events.

I agree it's a reason, but we are currently in that position having been in the same (or extended) house for 30+ years. We have a large family home and now that the kids have moved out for good (one boomeranged a bit), we have 3 spare bedrooms that are never used (except for someone occasionally 'staying over', or more likely, me getting drunk and snoring). We have a dining room that we even struggle to use at Xmas (we can seat 6 in the kitchen and probably haven't used the dining room more than four times in the last 3 years) and it all needs cleaning, maintaining and heating.

I want to move to something smaller, but Mrs Wz likes the house and where we are geographically (friends, gym etc). It's always a hard decision, but the current tax laws actually encourage us to stay in a large house half of which isn't used. If there is a housing crisis (and there is) it's not a great Government policy is it ?

And it's not just that I want to 'win' and move to somewhere smaller, but it would probably help a little

Fair enough. If you actually want to downsize - and many do - then go for it. It’s being made to feel guilty for not doing so that’s a bit annoying. We have 4 bedrooms. One is a main bedroom, one is a guest room (and, like you, a drunken/snoring escape room). One is an office/exercise room, and one is what my wife calls her 'craft room', or as I call it, her junk room. It suits us very well. While estate agents call these 4 'bedrooms', to us they are just 4 well-used upstairs rooms. Downstairs there are just 2 large rooms: one kitchen/diner with an armchair in the corner from which I can watch football and true crime series on Netflix. The other a big sitting room for my wife to watch Strictly and Coronation St, and furtively eat toffees that she thinks I don’t know about. It all works very well, and is the sort of arrangement that I’ve always wanted.

 

[Motogull]

Are there that many ways of avoiding IHT?

Trusts?

 

[warmleyseagull]

Are there that many ways of avoiding IHT? I don’t see how we can avoid it really, apart from leaving a big chunk to charity. We don’t have kids, and gifting cash (and hoping you live 7+ years) is risky if, like my wife, you worry about care home fees and other unexpected events.

One way is to buy AIM shares; hold for two years and they are exempt from IHT as classified as unlisted investment and therefore eligible for 100% business property relief. There are plenty of AIM wrappers out there for this purpose.

 

[nicko31]

As has been stated before, if you're a couple leaving your main residence to your children, they will only be taxed on that part over £1M and significant estates without any residential property are unusual. However all you ever see quoted is the £325K. The simple fact is that you have to be quite well off to pay significant Inheritance tax on your estate.

Just another example of the lies constantly told to the naïve and most vulnerable in Society to get them to vote against their interests yet again

1m is loads, all this is yet again a favour for their mates

 

[Colonel Mustard]

Trusts?

Might be a bit complicated but I’ll do some more research, thanks. I should say, I’m not obsessed with avoiding or reducing IHT. Far from it. I won’t be here after all so why should I care that much? No one likes paying tax but I accept it’s essential. I suppose I'd just like to see it going to a particular good cause rather than simply vanishing into the Exchequer and contributing to things I don’t like very much.

One way is to buy AIM shares; hold for two years and they are exempt from IHT as classified as unlisted investment and therefore eligible for 100% business property relief. There are plenty of AIM wrappers out there for this purpose.

Interesting, thanks. I didn’t know this. I’m a keen amateur investor so this has some appeal.

 

[dazzer6666]

Are there that many ways of avoiding IHT? I don’t see how we can avoid it really, apart from leaving a big chunk to charity. We don’t have kids, and gifting cash (and hoping you live 7+ years) is risky if, like my wife, you worry about care home fees and other unexpected events.

-make sure your wills are drawn up in the best way, property is split tenants in common etc
-arrange assets as efficiently as possible (for example SIPPs are outside of your estate for IHT purposes and you can bequeath them how you wish)
-make use of the 3k pa gift allowance to offspring
-look at using trusts (also tie in with your wills), you can also put money in trust for your offspring but continue to benefit from the income in the meantime (trusts will be oustide your estate for IHT purposes)
-use the 7 year gift rule (for example we’re just about to gift some cash to help our daughter buy her own place)
-and the most useful advice of all, spend it ! You’ve spent a lifetime working, earning and saving, don’t spend your later years worrying about care homes and not doing stuff you want to do.

 

[nicko31]

Yes, but if there was an incentive through IHT rules or other scheme to downsize, more would do it. At the moment there is a further disincentive through IHT rules.

This and a lack of suitable housing stock to downsize too.

And yes, the IHT rules are making our housing crisis worse

 

[dazzer6666]

This and a lack of suitable housing stock to downsize too.

Hugely - bungalows are in short supply/high demand, and expensive (meaning any incentive to move is limited anyway) and very few new ones are being built, and the ‘assisted housing’ type places are also stupidly expensive for what you get - hardly surprising the elderly aren’t moving out……

 

[A mex eyecan]

Hugely - bungalows are in short supply/high demand, and expensive (meaning any incentive to move is limited anyway) and very few new ones are being built, and the ‘assisted housing’ type places are also stupidly expensive for what you get - hardly surprising the elderly aren’t moving out……

bungalows being turned into houses in many cases will make shortages worse as well

 

[dazzer6666]

bungalows being turned into houses in many cases will make shortages worse as well

Yep….seen quite a bit of that around here. Nice rural bungalows (mostly 50s-70s builds) being bought, bulldozed and replaced with big modern ‘executive’ homes on the same plot……DFLs in the main probably.

 

[Colonel Mustard]

-make sure your wills are drawn up in the best way, property is split tenants in common etc
-arrange assets as efficiently as possible (for example SIPPs are outside of your estate for IHT purposes and you can bequeath them how you wish)
-make use of the 3k pa gift allowance to offspring
-look at using trusts (also tie in with your wills), you can also put money in trust for your offspring but continue to benefit from the income in the meantime (trusts will be oustide your estate for IHT purposes)
-use the 7 year gift rule (for example we’re just about to gift some cash to help our daughter buy her own place)
-and the most useful advice of all, spend it ! You’ve spent a lifetime working, earning and saving, don’t spend your later years worrying about care homes and not doing stuff you want to do.

Good advice, thanks, though we’ve no kids which restricts some options. I didn’t know that about SIPPs, which we have, still untouched. I just checked Hargreaves Lansdown, and it seems SIPPs are IHT-free but if you die at 75 or older, the beneficiary still pays income tax on withdrawals — which is probably fair enough. But yes, I really need to be more proactive about this. I’m all in favour of your final point, about spending. It’s interesting how, after a working lifetime trying to be (reasonably) sensible about saving and planning for retirement, it suddenly becomes quite hard to spend the fruits of that planning.

 

[dazzer6666]

Good advice, thanks, though we’ve no kids which restricts some options. I didn’t know that about SIPPs, which we have, still untouched. I just checked Hargreaves Lansdown, and it seems SIPPs are IHT-free but if you die at 75 or older, the beneficiary still pays income tax on withdrawals — which is probably fair enough. But yes, I really need to be more proactive about this. I’m all in favour of your final point, about spending. It’s interesting how, after a working lifetime trying to be (reasonably) sensible about saving and planning for retirement, it suddenly becomes quite hard to spend the fruits of that planning.

Agreed…..I found it quite psychologically difficult at first (and have had many, many discussions about this with close colleagues who decided to take early retirement around the same time) - essentially changing a lifetime’s habit but fundamentally you need to question what you were saving for 30 or 40 years for ? Have to say we’re fully into it now though - mainly through taking loads of holidays as we’re not into materialistic stuff otherwise. I‘m also convinced that as we age the trips will get less ambitious, less frequent and much less expensive so we’re doing it now while we’re still motivated and able to do so. If the money starts to run out we’ll just cut back on them - simple really. Once we’ve helped the kids onto the property ladder there’s nothing else major on the horizon, so will continue to burn through cash from pensions and savings for 10 years until the state pension kicks in and balances things up a bit.

 

[Bodian]

Good advice, thanks, though we’ve no kids which restricts some options. I didn’t know that about SIPPs, which we have, still untouched. I just checked Hargreaves Lansdown, and it seems SIPPs are IHT-free but if you die at 75 or older, the beneficiary still pays income tax on withdrawals — which is probably fair enough. But yes, I really need to be more proactive about this. I’m all in favour of your final point, about spending. It’s interesting how, after a working lifetime trying to be (reasonably) sensible about saving and planning for retirement, it suddenly becomes quite hard to spend the fruits of that planning.

The £3k gift allowance isn't related to offspring - you can gift it to anyone, or a range of people.

The 7-year thing for larger gifts is a little more complicated. But again, it's to anyone, not just offspring - and may be taxed on a sliding scale depending on where it is within the 7 years before death.

And I suppose it very much depends upon your beneficiaries and your relationship to them, what you want them to benefit from and so on. We don't have kids either, and so I don't feel any need / desire to maximise any estate I leave, or to do anything to avoid any taxes (it's incredibly unlikely to be big enough for IHT anyway). So, my nieces who will benefit don't actually know that they will - and aren't 'expecting/planning' on doing so. So - anything they receive will be a welcome bonus for them. If it's taxed first, then they won't feel that they have 'lost out' as such - because they weren't expecting it and haven't 'done anything to earn it' as such (like putting up with me as a parent for instance!).

 

[Motogull]

 

[Justice]

It’s a double tax move to Australia.

 

[Colonel Mustard]

It’s a double tax move to Australia.