Inheritance- any legal help welcome

[wendyg]

We've had a bit of a shock, my husbands parents have decided (for no discernable reason) to change their wills in favour of their grandchildren (our kids). While I'm not going to try to change their minds (they can do what they like with their own money) I'm horrified about the idea that they could get this money very young.

I want to ask them to put some sort of trust in place, at least. What's the current wisdom??

[themaskedavenger]

My wifes parents are thinking of doing similar but to go into trust that my wife is lord and master of until they are of age.

Grandparents think it gets around inheritance tax i.e. you pay then when you pass it on to the kids they pay.

In reality they wont have any thing to leave as when they get older they will have to liquidise assets to get care so anything they have will be spent on that and very little will be left over. The goverment gives next to nothing while you have some assest.

It might be worth asking them to re-consider in that giving the money to you as the parents will help the children more as it will help pay for education help out buying first putting a roof over the kids heads.

In my situation its a little worse as we have no children so we have to administer it but it goes elsewhere. My worry is that they will die before we have kids so that ours are then left out. But as you say its there money.............

[speedychrissie]

trust funds are definitely a better idea than just giving a 10 year old with a sweet tooth a load of money, but i also think that it may be a better idea for your parents to properly consider their options. the tax on their money is the same which ever way they give it (as far as i am aware), so they should really be giving their money in teh way that is most beneficial to the ones they care about.

chris

[gasblaster]

wendyg said:

We've had a bit of a shock, my husbands parents have decided (for no discernable reason) to change their wills in favour of their grandchildren (our kids). While I'm not going to try to change their minds (they can do what they like with their own money) I'm horrified about the idea that they could get this money very young. I want to ask them to put some sort of trust in place, at least. What's the current wisdom??

Ferraris and cocaine are much better when you're young, don't be a spoilsport!

[pdV6]

themaskedavenger said:

Grandparents think it gets around inheritance tax i.e. you pay then when you pass it on to the kids they pay.

I can kind of see the logic in this, but the reality is that it won't help, as it'll be taxed on giving it to the grandchildren and your money will also be taxed when you leave it to whoever.

At the end of the day, who gets it is immeterial - Gordy gets his cut anyway.

What they do want to consider is minimising their exposure to IHT (i.e. spend it all!). But seriously, there are ways to minimise it. E.g. if their main asset (house) is in joint names it could be well worth splitting it 50:50 and leaving each ½ separately in trust, thus gaining twice the IHT allowance (currently £263k I think).

Bottom line is: they need to seek expert financial planning advice rather than guessing what's best based on "common sense" - tax issues are never straightforward!

[superlightr]

From memory, I dont beleive they cant inherite under 18yrs old. It has to go into trust for them. Grand parents /Parents /Grand chidren. Normally the parents are the trustees for the grand Children and can use the money for the beneift of the children as best they see fit. So shoulnt be a problem provided the children dont get to 18, the parents will get the dosh. Clearly they perhaps shouldnt get a Ferrari if the kids cant drive but an expensive family holiday would be ok. (provided the children come along)

Cant see how this makes any difference to IHT buy skipping a generation.
Think the above is still the case but not done it for many years.

[grass widow]

We're just in the middle of setting up a trust for my daughter, and the money will be hers at 18, there is nothing you can legally do to stop that.

We have had to get a professional trustee in as well as my husband and myself being trustees, so that you can't fiddle the trust in your own favour.

Keep all the paperwork for it too, because when the little darlings grow up, if they don't think you have invested the money wisely enough for them, they can sue you So keep on their good side as well

Get a good financial adviser too, we have and he's been brilliant. Best of luck it's a minefield when you get into it.

[vixpy1]

grass widow said:

We're just in the middle of setting up a trust for my daughter, and the money will be hers at 18, there is nothing you can legally do to stop that.

No.. you can.

You can set up a Maintainace trust, the kid becoms entitled to the income from the trust for life at 18, and then recieves the capital when the trustees decide they are mature enough, usually 25 or 30.

[WouldBWelder]

Current IHT level is 275k I think.

[alfaman]

Gifting assets to "skip" a generation can be useful, as it may avoid IHT when the assets would eventually be given or bequeathed from parents to children.

To remove IHT liability the gifter will need to live 7 years beyond the date of the PET (potentially exempt transfer )-(I'm not sure of the legal intricacies if 1 grandparent dies within 7 years , and the other lives beyond 7 years.)

[vixpy1]

alfaman said:

Gifting assets to "skip" a generation can be useful, as it may avoid IHT when the assets would eventually be given or bequeathed from parents to children. To remove IHT liability the gifter will need to live 7 years beyond the date of the PET (potentially exempt transfer )-(I'm not sure of the legal intricacies if 1 grandparent dies within 7 years , and the other lives beyond 7 years.)

The best thing to do is the first Grand parent to die leaves everything to thier spouse (tax free) Then they pass on the money and live for 7 years..

viola, no tax.

[alfaman]

vixpy1 said:

alfaman said: Gifting assets to "skip" a generation can be useful, as it may avoid IHT when the assets would eventually be given or bequeathed from parents to children. To remove IHT liability the gifter will need to live 7 years beyond the date of the PET (potentially exempt transfer )-(I'm not sure of the legal intricacies if 1 grandparent dies within 7 years , and the other lives beyond 7 years.) The best thing to do is the first Grand parent to die leaves everything to thier spouse (tax free) Then they pass on the money and live for 7 years.. viola, no tax.

but if the 2nd grandparent dies shortly after the first .... you could be totally stuffed tax -wise. There must a legal way of gifting *now* and avoiding tax if 1 grandparent lives for 7 years.

[themaskedavenger]

One thing to note on the tennants in common lark

(One person dies leaves half the house in trust to the kids but partner gets to live there for the rest of natural life etc then it passes on to kids but 2 lots of £270K getting round the IHT if more than that)

They are looking at charging the partner that is left behind living in the house that half of is in trust as having half a house for free is a taxable benifit.

Nice bunch really..

[pdV6]

themaskedavenger said:

They are looking at charging the partner that is left behind living in the house that half of is in trust as having half a house for free is a taxable benifit.

c-nuts. IHT has to be one of the most unfair of all taxes and *still* Gordy wants his extra slice of pie.

[egomeister]

pdV6 said:

c-nuts. IHT has to be one of the most unfair of all taxes and *still* Gordy wants his extra slice of pie.

Yeah, death tax - it's a nice touch isn't it.... If you spend it they tax it, if you don't spend it they'll have it away when you die.

We've been going through the same thing since my dad died, setting up a trust to protect half of the estate - still don't really understand what its all about and how you can seemingly just "invent" a trust which is exempt from IHT (up to a point...)

[4wheel drifter]

Avoidance is legal! I hate to think how many times that money has been taxed.
There's: Income Tax, National Insurance, Stamp Duty, Tax on unearned income, Capital Gains Tax.....


But don't let the b*stards grind you down!

http://info.moneyweek.com/article.php?p_id=412&b

Oh, and lets sack the government as soon as possible.

[number 46]

Best to talk to a financial advisor, but... the second death is the problem,as there is no tax on transfers between spouses, tennants in common will double the IHT amount, and the PET is the best way to pass on money, you still benefit even if you don't live for 7 years after the gift as the relief is tapered. Of course the total value of the estates does come into it, but with careful forward planning there is no need to give Gordon 'the robber baron' anything !!!!

[simpo two]

number 46 said:

Best to talk to a financial advisor, but... the second death is the problem

Check out nil rate band discretionary trusts (NRBDTs). I told my uncle about this and he promptly incorporated it in his will. When he died a couple of years later, I got, much to my surprise, a bequest of £10K !

[grass widow]

vixpy1 said:

grass widow said: We're just in the middle of setting up a trust for my daughter, and the money will be hers at 18, there is nothing you can legally do to stop that. No.. you can. You can set up a Maintainace trust, the kid becoms entitled to the income from the trust for life at 18, and then recieves the capital when the trustees decide they are mature enough, usually 25 or 30.

Thanks for that, will ask about it.

[wedg1e]

vixpy1 said:

viola, no tax.

What if your grandparents don't play the viola? For example, my grandad played the cornet in the ICI works band, but I think he still had to pay tax...