Inheritance tax query
Posted by: Bruce Woodhouse on 12 January 2004
My ageing parents are getting some professional advice re inheritance tax 'avoidance' and have asked my opinion. They are apparently thinking of creating a Trust if one dies where half the Estate is 'held', hoping that by splitting the Estate in this way each half is below the threshold. At least this is what I understood.
Quick query-what is the current threshold as a guide, and once triggerred is tax paid on the whole or just the excess?
Anyone recommend a good resource for me to do a bit of reading around the subject? I'll be chatting to my accountant too I guess.
Bruce
Quick query-what is the current threshold as a guide, and once triggerred is tax paid on the whole or just the excess?
Anyone recommend a good resource for me to do a bit of reading around the subject? I'll be chatting to my accountant too I guess.
Bruce
Posted on: 12 January 2004 by David Stewart
Bruce,
You'll find the IR inheritance tax web-page here -
http://www.inlandrevenue.gov.uk/cto/iht.htm
That may provide you with some help. You have to pay IT on everything above the threshold. I believe there are changes going on which may (retrospectively) affect the status of some trusts set up specifically to avoid IT. You need to take legal adviceI think.
David
You'll find the IR inheritance tax web-page here -
http://www.inlandrevenue.gov.uk/cto/iht.htm
That may provide you with some help. You have to pay IT on everything above the threshold. I believe there are changes going on which may (retrospectively) affect the status of some trusts set up specifically to avoid IT. You need to take legal adviceI think.
David
Posted on: 12 January 2004 by Bruce Woodhouse
Thanks for the link. They have had legal advice and I may do the same. I have a curiously ambivalent attitude to all this, I'd rather they spent every last penny before they die, however my parents feel a strong sense of duty to leave a significant legacy to their kids.
Bruce
Bruce
Posted on: 12 January 2004 by Derek Wright
There may be advantages in arranging ownership of the house such that when one person requires to go into a care home (if you can find one) the other person does not have to sell the house to pay for the care home accomodation.
Not a cheerful subject - it takes a long time to get over the trauma
Derek
<< >>
Not a cheerful subject - it takes a long time to get over the trauma
Derek
<< >>
Posted on: 12 January 2004 by Bruce Woodhouse
Again I'm rather out of step here-I think that those with the ability to pay should use their funds to pay for at least the board/lodging component of their elderly care. My parents would not agree (nor my sib).
Bruce
Bruce
Posted on: 12 January 2004 by Tarquin Maynard - Portly
Bruce
See an independent financial adviser that specialises in IHT.
If they charge a fee, so what?
Regards
Mike
On the Yellow Brick Road and Happy
See an independent financial adviser that specialises in IHT.
If they charge a fee, so what?
Regards
Mike
On the Yellow Brick Road and Happy
Posted on: 12 January 2004 by MichaelC
quote:
Originally posted by alexgerrard:
Bruce
It can be quite a specialist area, especially if you are considering a trust situation, and a suitably qualified lawyer/accountant/IFA would be my recommendation.
I don't know anyone in your area, but you could always post a question on http://www.accountingweb.co.uk. There are usually plenty of friendly souls on there (including me and at least one other Naim forum member) offering a modicum of free advice and lots of directions towards paid-for help.
Cheers
ag
Bruce
Follow Alex's advice - see your accountant. It is well worth registering and posting a detailed question on the AccountingWeb site - you should get a number of helpful replies.
Cheers
Mike
Posted on: 12 January 2004 by MichaelC
quote:
Originally posted by Derek Wright:
There may be advantages in arranging ownership of the house such that when one person requires to go into a care home (if you can find one) the other person does not have to sell the house to pay for the care home accomodation.
Not a cheerful subject - it takes a long time to get over the trauma
Derek
<< >>
This is an area in which you have to be very carefull - artificial transactions can be looked through ...
Mike
Posted on: 15 January 2004 by NB
Quote:-
My ageing parents are getting some professional advice re inheritance tax 'avoidance' and have asked my opinion. They are apparently thinking of creating a Trust if one dies where half the Estate is 'held', hoping that by splitting the Estate in this way each half is below the threshold. At least this is what I understood
_________________________________________________________________________________
Bruce,
Why don't you suggest that your parents pass one half of their house to their children on first death with the surviving spouse retaining the second half.
This also in effect doubles the Tax threshold without paying Trust fees, which can be expensive.
Regards
NB
Ps if you do seek professional advice then seek an advisor who is a member of STEP (Society for Trust and Estates practisioner)
[This message was edited by NB on THURSDAY 15 January 2004 at 09:25.]
My ageing parents are getting some professional advice re inheritance tax 'avoidance' and have asked my opinion. They are apparently thinking of creating a Trust if one dies where half the Estate is 'held', hoping that by splitting the Estate in this way each half is below the threshold. At least this is what I understood
_________________________________________________________________________________
Bruce,
Why don't you suggest that your parents pass one half of their house to their children on first death with the surviving spouse retaining the second half.
This also in effect doubles the Tax threshold without paying Trust fees, which can be expensive.
Regards
NB
Ps if you do seek professional advice then seek an advisor who is a member of STEP (Society for Trust and Estates practisioner)
[This message was edited by NB on THURSDAY 15 January 2004 at 09:25.]
Posted on: 15 January 2004 by Bruce Woodhouse
Thanks NB. I think this is what they intend. I'm awaiting a draft and can then seek further advice.
Bruce
Bruce
Posted on: 15 January 2004 by NB
Bruce,
MY pleasure.
I gave the same advice to one of my clients potentially saving him £90k. I have a very happy client!
Regards
NB
MY pleasure.
I gave the same advice to one of my clients potentially saving him £90k. I have a very happy client!
Regards
NB
Posted on: 15 January 2004 by Martin D
Hi Guys
This is a very timely subject indeed. My wife’s parents have just died within 18m of one another. This subject is going to affect thousands more people than I first realised due to property prices in the UK. I considered myself an “ordinary bloke” and didn’t think I’d be involved in such matters – how wrong I was. Jane’s parents had a modest bungalow in Gloucestershire and some savings and a pension – KERRCHING for the tax man – the total worth is over the inheritance £255,00 limit and anything above this attracts a flat tax of 40%. Her parents did make some provision by the use of trusts but this has been queried by the Inland Revenue as not valid. So far the solicitor handling the work has been less than knowledgeable and has run up a bill of over £9000 (or a NAP500) for the work since the last death in June 2003. Any info on this gratefully received, if I find out anything I’ll post it here. I did find some excellent advice and info for all things financial including death duties etc at
http://www.fool.co.uk/taxes/taxes.htm?ref=foolschool
Many thanks
Martin
This is a very timely subject indeed. My wife’s parents have just died within 18m of one another. This subject is going to affect thousands more people than I first realised due to property prices in the UK. I considered myself an “ordinary bloke” and didn’t think I’d be involved in such matters – how wrong I was. Jane’s parents had a modest bungalow in Gloucestershire and some savings and a pension – KERRCHING for the tax man – the total worth is over the inheritance £255,00 limit and anything above this attracts a flat tax of 40%. Her parents did make some provision by the use of trusts but this has been queried by the Inland Revenue as not valid. So far the solicitor handling the work has been less than knowledgeable and has run up a bill of over £9000 (or a NAP500) for the work since the last death in June 2003. Any info on this gratefully received, if I find out anything I’ll post it here. I did find some excellent advice and info for all things financial including death duties etc at
http://www.fool.co.uk/taxes/taxes.htm?ref=foolschool
Many thanks
Martin
Posted on: 16 January 2004 by NB
Martin,
It appears on the surface that you have been given poor advice by your advisor. You could have quite easily saved a considerable amount of IHT by simply taking the course of action outlined in my above post.
By transfering the property to the children on first death dirsectly rather than placing it in trust saves a considerable amount of fees. The cost to my client for the above advice was £75 + Vat. Considerably less than what you have paid in legal fees.
My late father and business partner was a practicing memeber of STEP and I legally avoided any IHT myself by taking this aproach.
Having taken your advisors advice and then finding out that such action is not valid could be seen as professional negligence and you may find that you have a case against your current advisor.
In your position have you sought a second opinion as to whether the original advice was valid?
Regards
NB
It appears on the surface that you have been given poor advice by your advisor. You could have quite easily saved a considerable amount of IHT by simply taking the course of action outlined in my above post.
By transfering the property to the children on first death dirsectly rather than placing it in trust saves a considerable amount of fees. The cost to my client for the above advice was £75 + Vat. Considerably less than what you have paid in legal fees.
My late father and business partner was a practicing memeber of STEP and I legally avoided any IHT myself by taking this aproach.
Having taken your advisors advice and then finding out that such action is not valid could be seen as professional negligence and you may find that you have a case against your current advisor.
In your position have you sought a second opinion as to whether the original advice was valid?
Regards
NB
Posted on: 16 January 2004 by Bruce Woodhouse
I don't want to abuse your advice NB but a quick query-if a property is transferred on the death of one parent would the benefactor(s)not pay Capital Gains?
Bruce
Bruce
Posted on: 16 January 2004 by Berlin Fritz
What is exactly is Tax please ?
Fritz Von Berlin-Paris-Peckham
Fritz Von Berlin-Paris-Peckham
Posted on: 16 January 2004 by Berlin Fritz
Bruce,
Seriously; I think that first link to the IR thread and whatever that brings up is the safest bet, and I'd personally use. I assume you are fishing for advice and opinions as one does, but like justice, emotion shouldn't play any part in it. HM Tax office itself will eventually be the recipient of the said taxes (obvious I know, but only "you" or the person(s) involved are liable) and not yer friendly financial advisors come accountants who naturally have a vested interest.
If one digs deeply enough with the IR itself you may well find after persistance (letters etc) that you can get one to one professional advice (FREE), as in the long run it's also in their interests, not just automatically a case of the Government getting all it can, but advising you to spread your wealth amongst the family as painlessly (tax-wise) as possible, which hopefully makes everybody happy.
You can decide naturally yourself, but if future postings from financial advisors pooh-pooh all I have said, you can just ask them WHY ? can't you, without being blinded with rocket science.
Cheers,& Good Luck,
Fritz Von Don'ttrustnoneofthebuggers
Seriously; I think that first link to the IR thread and whatever that brings up is the safest bet, and I'd personally use. I assume you are fishing for advice and opinions as one does, but like justice, emotion shouldn't play any part in it. HM Tax office itself will eventually be the recipient of the said taxes (obvious I know, but only "you" or the person(s) involved are liable) and not yer friendly financial advisors come accountants who naturally have a vested interest.
If one digs deeply enough with the IR itself you may well find after persistance (letters etc) that you can get one to one professional advice (FREE), as in the long run it's also in their interests, not just automatically a case of the Government getting all it can, but advising you to spread your wealth amongst the family as painlessly (tax-wise) as possible, which hopefully makes everybody happy.
You can decide naturally yourself, but if future postings from financial advisors pooh-pooh all I have said, you can just ask them WHY ? can't you, without being blinded with rocket science.
Cheers,& Good Luck,
Fritz Von Don'ttrustnoneofthebuggers
Posted on: 16 January 2004 by NB
Bruce,
Normal Capital Gains Tax rules apply. If the bennafactor sells the property at some future time. Then the base cost of their half would be the value of the house at the date of first death. Dont forget that there is still the capital Gains Tax exemption applies and there is taper relief to claim.
Regards
NB
Normal Capital Gains Tax rules apply. If the bennafactor sells the property at some future time. Then the base cost of their half would be the value of the house at the date of first death. Dont forget that there is still the capital Gains Tax exemption applies and there is taper relief to claim.
Regards
NB
Posted on: 16 January 2004 by Berlin Fritz
As an afterthought before I get an onslaught of whatever ? I'm not against
professional financial advisors/accountants helping people with their
investemnts and incomes, I'm against the principal of paying somebody for the
privelege of receiving information that's the job of the IR, irrespective of
which tax it may be (personal not corperate).
If in this case false/wrong or
miss-information is given in this on-going ever-changing field by mistake or
otherwise, only the taxpayer is liable, not the "Advisor" unless of course you
wish to take it through many years of legal proceedings getting nowhere
expensibly fast, I digress, in this after all Socialist run country, innit?
Fritz Von Youholdthecardsnotthem
Ps. It's the gift that counts, not the fancy wrapping paper
professional financial advisors/accountants helping people with their
investemnts and incomes, I'm against the principal of paying somebody for the
privelege of receiving information that's the job of the IR, irrespective of
which tax it may be (personal not corperate).
If in this case false/wrong or
miss-information is given in this on-going ever-changing field by mistake or
otherwise, only the taxpayer is liable, not the "Advisor" unless of course you
wish to take it through many years of legal proceedings getting nowhere
expensibly fast, I digress, in this after all Socialist run country, innit?
Fritz Von Youholdthecardsnotthem
Ps. It's the gift that counts, not the fancy wrapping paper
Posted on: 16 January 2004 by Bruce Woodhouse
I'm pretty much with you on all those posts Fritz.
My main concern is that my parents have taken advice from a single source and I wanted a bit of background so I could understand what they have been told. The resources people have suggested have been of help, now I can use my own trusted advisers with some basic knowledge.
As a well-paid member of society, and with no dependents, I am ambivalent about the whole process of 'avoiding tax'. My parents however are very anxious to preserve a legacy, they also have a history of being ripped off in finacial affairs!
Bruce
My main concern is that my parents have taken advice from a single source and I wanted a bit of background so I could understand what they have been told. The resources people have suggested have been of help, now I can use my own trusted advisers with some basic knowledge.
As a well-paid member of society, and with no dependents, I am ambivalent about the whole process of 'avoiding tax'. My parents however are very anxious to preserve a legacy, they also have a history of being ripped off in finacial affairs!
Bruce
Posted on: 16 January 2004 by Tarquin Maynard - Portly
quote:
Originally posted by Bruce Woodhouse:
I don't want to abuse your advice NB but a quick query-if a property is transferred on the death of one parent would the benefactor(s)not pay Capital Gains?
Bruce
Bruce
AFAIK CGT ceases on death but there is no CGT payable on property anyway if it is the main residence. Plus transfers between spouses are exempt. THIS IS A COMPLEX MATTER THAT NEEDS PROFESSIONAL ADVICE!!
Trawling the Inland Revenue ( Capital Taxes Office ) website may be of use but lets face it the Taxman is not going to show you how to avoid every tax going. If you get it wrong thats just tough luck ( and potentially vety expensive ) but if an IFA or other professional bodges it, you may have a Professional Indemnity claim. Thats why they have PI insurance.
An example of a plan that you wont find via the Revenue that works for lump sums such as death in service / life assurance payments: set up at Trust, on death of the husband ( usually dies before vthe woman ) pay the proceeds into it. This avoids the £ going into her Estate. The Trustees then make interest free loans to the widow, payable on death or demand. On her death, her Estate has a debt equal to the outstanding loan value, which reduces the value of the Estate and so any IHT bill. The Trust is then back in funds, and then makes further loans to next of kin, on the same terms. Etc etc. THIS IS NOT TO BE TAKEN AS ADVICE!!!!
To find an Independent Financial Adviser in your area try this websit: http://www.ifap.org.uk/
Churchill said it; Inheritance Tax is paud by those who trust the Revenue more than they like their heirs.
Finally, seek professional advice....
Regards
Mike
On the Yellow Brick Road and Happy