Discussion
Cupramax said:
My mother left signed dated notes with her will, of all relevant gifts. Ive had no issues from the Probate application so i guess this is sufficient.
My father in law did this and it was a large sum over approx 3-4 years, unfortunately he died unexpectantly before the 7 years, result = BIG IHT bill!GreatGranny said:
My father in law did this and it was a large sum over approx 3-4 years, unfortunately he died unexpectantly before the 7 years, result = BIG IHT bill!
Inheritance Tax is charged on gifts at 40 per cent. But if the person died between three and seven years of making a lifetime gift, you can apply what's known as 'Taper Relief' to the amount of Inheritance Tax due to reduce the amount payable. A Taper relief percentage is applied to the tax due,survived 3 to 4 years - 20% reduction in tax payable
survived 4 to 5 years - 40% reduction in tax payable
survived 5 to 6 years - 60% reduction in tax payable
survived 6 to 7 years - 80% reduction in tax payable
A "gift inter vivos" may be set up to mimic the effect of the tapering down effect; done properly, it can offer effective protection if the donor wants to gift over the short term. Alternatively, if the donor has a looser idea of his/her gifting programme, longer cover my also serve, either on level or declining term basis. Whole of Life cover can be expensive, but offers complete peace of mind.
If you want to mitigate IHT, remember to write your policy in trust, remember that regular contributions reduce the amount by which your estate is exposed to IHT and remember to always keep an eye on the value of your estate, to ensure that the amount that you are overed for, remains effective. You can also, of course, gift within annual limits, referring to the previous year to roll over some allowances.
You can establish wealth and assets into a trust, which is slightly more constricting. Business Property Relief, which is even more 'rsky' and limiting and there are many death bed schemes, all open, to varying degrees, to challenge by HMRC. With many people falling into the trap of IHT, the sooner in life that you plan, the better. Remember too, that gifting is pointless unless your will is squared away. Why plan to save if it won't be going to the people you intend it to?
If you want to mitigate IHT, remember to write your policy in trust, remember that regular contributions reduce the amount by which your estate is exposed to IHT and remember to always keep an eye on the value of your estate, to ensure that the amount that you are overed for, remains effective. You can also, of course, gift within annual limits, referring to the previous year to roll over some allowances.
You can establish wealth and assets into a trust, which is slightly more constricting. Business Property Relief, which is even more 'rsky' and limiting and there are many death bed schemes, all open, to varying degrees, to challenge by HMRC. With many people falling into the trap of IHT, the sooner in life that you plan, the better. Remember too, that gifting is pointless unless your will is squared away. Why plan to save if it won't be going to the people you intend it to?
Age and health at the time you wrote the policy would have an impact on the cost of the premium. But whether or not it is going to be cost effective will depend on the cost of the premium related to the exposure to IHT and the consequences to beneficiaries. I suppose the ultimate test of effectiveness will be if a claim is made on it! ;-)
Thinks: It is sometimes worth donors who are asset rich but cash poor asking those likely beneficiaries for assistance in paying the premiums.
Thinks: It is sometimes worth donors who are asset rich but cash poor asking those likely beneficiaries for assistance in paying the premiums.
Edited by Ginge R on Friday 7th February 16:08
gaz1234 said:
surely the regular small cash deposits wont be found?
You can bet your arse that if there is even the slightest suspicion that someone has tried to avoid paying tax, everything can and will be found... and the inheritance will be tied up for months/years whilst the investigation is happening.I would say that anyone gifting a sum large enough that the possible IHT liability for the person in receipt of the gift, should really set up a gift inter vivos life policy (provided age and health allow for reasonable premiums) and take that into account as part of the gift.
Or alternatively, as a friend of mine did, he pays the premium for the insurance for a gift from his father.
People are happy to pay hundreds/thousands to insure a car worth £X thousand, but seem to be reluctant to pay a few £10's on a life policy to protect what could easily result in a far bigger bill - although it's often as they don't receive good financial advice.
But then I would say that....
Don't forget that anything paid into an insurance policy by way of regular life insurance or assurance premiums will be taken off the back end of an IHT bill as well.
Make sure that records are kept and available for inspection to scream through probate which these days, can be ruthlessly efficient and won't leave many stones unturned. Yes, you can gift £250 per annum to lts of people which might help, but make sure that if HMRC go looking at your facebook account, you have hundreds of mates to support yor estate's claims!
The only thing about premiums I'll say is that the solution is rarely obvious at outset. The 'problem' has been, in many instances, decades in the gradual making and doesn't get resolved in an instant. By contrast, I will say though, the someone who insures his i-phone for a fiver a a month and then doesn't want 300k of cover for a little more than double that when he/she has a new young family to protect probably does need to reflect buster buster.
Make sure that records are kept and available for inspection to scream through probate which these days, can be ruthlessly efficient and won't leave many stones unturned. Yes, you can gift £250 per annum to lts of people which might help, but make sure that if HMRC go looking at your facebook account, you have hundreds of mates to support yor estate's claims!
The only thing about premiums I'll say is that the solution is rarely obvious at outset. The 'problem' has been, in many instances, decades in the gradual making and doesn't get resolved in an instant. By contrast, I will say though, the someone who insures his i-phone for a fiver a a month and then doesn't want 300k of cover for a little more than double that when he/she has a new young family to protect probably does need to reflect buster buster.
bernhund said:
On the same topic, but not wanting to start another thread. What happens with IHT if 2 become 1? For example, if we sold our house, as does my mother in law, then we buy one house between us, what then happens regarding the tax? Would the names on the deeds make all the difference?
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