BRFR Cake Stop 'breaking news' miscellany

[First Aspect]

Again, it is the result of choices made earlier on in life. I am fully aware that old age sneaks up on you but people should start to think about these things while in their 50s. Around the same time they are planning retirement for example.

I think you are being unrealistic tbh.

But the philosophical point I think PP is making is that such planning shouldn't be necessary (i.e. productive) and my point is that it shouldn't be such a cliff edge that forces Hobson's choices onto people.

 

[icowden]

So, say you live within Z3 in London, so your 3 bed terrace is "worth £1.3 million", and then you have a pension and investments.
You are 65-70.
Do explain how you would avoid paying any inheritance tax.
And don't suggest selling up and moving to another part of the country.

The most obvious is that my wife dies and leaves me the house. No IHT is due, but when I die I leave the house to my kids. I get both her threshold and mine and thus IHT is only payable on £300,000 at 40%. So £120,000 of IHT is due.

If I have the money for a good accountant then I set up a Trust, put my house into the Trust and hope to survive for 7 years.

 

[Dorset Boy]

The most obvious is that my wife dies and leaves me the house. No IHT is due, but when I die I leave the house to my kids. I get both her threshold and mine and thus IHT is only payable on £300,000 at 40%. So £120,000 of IHT is due.

If I have the money for a good accountant then I set up a Trust, put my house into the Trust and hope to survive for 7 years.

You absolutely don't put the house into trust.
You would have to pay the trust the open market rent on the property or it is a gift with reservation. you then have the absolute nightmare of the trust having to pay CGT on sale, all the accounting faff each year and the hassle of getting the property sold.
And if you put the house into a trust, you do not get the residence nil rate band as you have left it to the trust not your kids.
And accountants don't set up trusts btw.

Inheritance Tax revenues to Rachel are £7.1 billion so far this tax year.
A not insubstantial sum, and up on the same period last year by about £100 million

 

[Pblakeney]

I think you are being unrealistic tbh.

But the philosophical point I think PP is making is that such planning shouldn't be necessary (i.e. productive) and my point is that it shouldn't be such a cliff edge that forces Hobson's choices onto people.

I'd say the opposite. I am the one being realistic and planning for how things are rather than how I'd like them to be.

 

[Pblakeney]

GPs to be paid £3k for prescribing weight loss drugs.
Seems like easy money on one side and the potential for unintended consequences on the other.

 

[First Aspect]

I'd say the opposite. I am the one being realistic and planning for how things are rather than how I'd like them to be.

Do you have to move out of your house to avoid it? Bear in mind there's a £500k exemption that doesn't apply to most people in most of the country, but disproportionately captures most of some areas, and fairly modest homes.

 

[Shortfall]

In my mind there was a key switch in the 90s (IIRC) when houses stopped being homes and became investments.
This along with selling off council houses was the birth of today's housing crisis.
I find it funny that those moaning about IHT are often the ones boasting about the value of their house.

I think it happened before that. There was huge inflation after the war and I think it was a deliberate policy of government(s) to inflate away the real value of our national debt. Peop!e saw their savings ravaged and their earnings shrinking in real terms and they quickly realised that owning your own house was a great hedge against that.
So far as IHT goes, whatever the merits of otherwise it wouldn't grind my gears so much if I didn't think that the government of the day weren't just going to pour it into the vast black hole where they seem to waste most of our money.

 

[icowden]

You absolutely don't put the house into trust.
You would have to pay the trust the open market rent on the property or it is a gift with reservation. you then have the absolute nightmare of the trust having to pay CGT on sale, all the accounting faff each year and the hassle of getting the property sold.
And if you put the house into a trust, you do not get the residence nil rate band as you have left it to the trust not your kids.
And accountants don't set up trusts btw.

It seemed to work for the 4th Viscount Rothermere who inherited a £1.5bn fortune and paid... no inheritance tax at all. Between inheritable non-dom status and his father's fortune being contained in Trusts in Bermuda and Jersey he avoided £600 million in tax. His houses are owned by companies based in the British Virgin Islands and St Lucia.

If you are wealthy enough, you don't pay inheritance tax.
https://www.theguardian.com/theobse...his father, who died,at £1.5 billion. Had the

 

[briantrumpet]

I think my feeling is that IHT doesn't generate much tax revenue, except for people who can't afford to avoid it, who end up paying an awful lot. These tend to be the same estates that have already been drained by 6 and 7 figure care costs. IHT should have a different name, be lower, broader based and more difficult to avoid.

Surely if the estate has been drained by care costs, there won't be much/any IHT to pay.

 

[Dorset Boy]

Surely if the estate has been drained by care costs, there won't be much/any IHT to pay.

Ah, don't get me onto the subject of how ignorant people are about how to fund long term care!

Dementia care is around £85,000 pa. Say for 10 years, with inflation, let's call it £1 million total cost, some of which will come from the person's income, say £30,000 pa. So net cost to the estate of about £650-700k.
However there are ways to fund the shortfall between the cost of care and income, but I won't suggest the solutions hedre as that is professional knowledge and doesn't come for free.

So definitely reduces the IHT liability.
Perhaps that is PBlakeney's great IHT mitigation plan!!

 

[First Aspect]

Surely if the estate has been drained by care costs, there won't be much/any IHT to pay.

Depends if the house is sold. Lots of people end up being cared for at home. It is actually better for them where possible.

 

[Dorset Boy]

Depends if the house is sold. Lots of people end up being cared for at home. It is actually better for them where possible.

It often really is not better for them to be cared for at home.

 

[First Aspect]

Ah, don't get me onto the subject of how ignorant people are about how to fund long term care!

Dementia care is around £85,000 pa. Say for 10 years, with inflation, let's call it £1 million total cost, some of which will come from the person's income, say £30,000 pa. So net cost to the estate of about £650-700k.

So definitely reduces the IHT liability.
Perhaps that is PBlakeney's great IHT mitigation plan!!

Dementia is an epidemic. My own planning, since I have no heirs, will involve avoiding being kept alive by doctors when I don't know who I am. This may involve an alpine holiday, having found good homes for the cats.

 

[First Aspect]

It often really is not better for them to be cared for at home.

There's not a good way to have dementia. And people's experiences vary. Not everyone becomes cheerfully and blissfully confused. Some are afraid and lost 100% of their waking lives. Some get violent. Some of those people would be calmer in a space where muscle memory leads them to where the toilet is.

 

[Psamathe]

As per Dorset Boy's post, I don't think it is that easy to avoid.

Depends how rich you are. I suppose that applies to lots of other taxes.

It is a choice. Doing nothing is a choice. Choices have consequences. IHT is the end result of choices.

How to avoid it depends on individual circumstances. For somebody who would be potentially paying IHT it can be avoided though measures change over time and circumstances. I've had to "unwind" one measure when circumstances changes and move to a different measure.