IHT When Too Late to Plan????
Discussion
Thanks for opening.
Parent died last week, was an accountant and I thought that had planned well for tax from the limited what we spoke about, saying local solicitors had been engaged on planning.
Having seen wills this week (I am executor) and how much money parents have in cash and assets, clear that no thought was paid to tax planning at all.
Other parent goes into a home, self funded, next week, so that's gonna use a bit up at 2100 per week, but won't really dent things.
The family home will likely be sold, that I know removes an allowance, but its an utter ball ache renting these days and and don't really want the stress of it.
Any ideas welcome. Will likely talk to a financial advisor, but quietly concerned on how they are paid to sell and that fact there is tightening of avoidance slowly going on with some products.
Thanks in advance.
Parent died last week, was an accountant and I thought that had planned well for tax from the limited what we spoke about, saying local solicitors had been engaged on planning.
Having seen wills this week (I am executor) and how much money parents have in cash and assets, clear that no thought was paid to tax planning at all.
Other parent goes into a home, self funded, next week, so that's gonna use a bit up at 2100 per week, but won't really dent things.
The family home will likely be sold, that I know removes an allowance, but its an utter ball ache renting these days and and don't really want the stress of it.
Any ideas welcome. Will likely talk to a financial advisor, but quietly concerned on how they are paid to sell and that fact there is tightening of avoidance slowly going on with some products.
Thanks in advance.
the_g_ster said:
Any ideas welcome. Thanks in advance.
If one parent left their estate to the other I think there should be a fair amount of scope for the surviving parent to engage in some quick IHT planning. Its effectiveness will depend, to some extent, on how long the survivor lives. 7-year rule and all that.If I were you I'd be getting some serious professional input asap. Someone paid by the hour.
Condolences that one of your parents has died.
I wouldn’t worry too much about the cost of getting advice - if everything has been left to your other parent and the £100K/yr cost of their care isn’t going to make much of a dent, then the cost of advice will be relatively trivial.
And if IHT ends up being payable on their estate then think of the costs as being discounted 40%.
I wouldn’t worry too much about the cost of getting advice - if everything has been left to your other parent and the £100K/yr cost of their care isn’t going to make much of a dent, then the cost of advice will be relatively trivial.
And if IHT ends up being payable on their estate then think of the costs as being discounted 40%.
the_g_ster said:
Ok, so if you sell a house is worth 1m....total nil rate band for residence on husband and wife is then 350 that attracts 0 IHT. The 650k goes into the pot to be set against individual allowance at 325 (subject to CLTs and PETs).
Parent 1 sadly dies and presumably / “ usually “ (?) leaves everything including the house to the survivor. At that point nil IHT due or payable.
Parent 2 then equally sadly passes away and everything left to the estate including the value of the house. At that point if the total value is say £2m for ease of numbers ( or less ) including the principal residence then total IHT allowances is 2x £325k plus 2x £175k ( assuming the house is left to the direct descendants ie children ) or £1m in all,Surplus is £1m and current IHT then payable is at 40% or £400k.
Gap between parent 1 and 2 matters not.
There will be some caveats / nuances to that depending on what the assets left actually are and some are IHT tax free if more specialised tax relief schemes.
After April next year any unused pension pots if private ie not DB scheme also go into the calculations.
Definitely , especially given perhaps the added “complications “of your other Parent going into a home.
One other thing to be aware of is the “ deprivation of assets “ conversation that a Local Authority might look into if you do end up with additional “ tax planning “.
Best of luck with it all.
There are also threads on here about probate / Executorship so if you run into additional questions shout on there.
One other thing to be aware of is the “ deprivation of assets “ conversation that a Local Authority might look into if you do end up with additional “ tax planning “.
Best of luck with it all.
There are also threads on here about probate / Executorship so if you run into additional questions shout on there.
As has been said above - if £100K / year in care home fees "isn't going to make a much of a dent" then it sounds like there's a lot cash / liquid assets.
I have recently become very "unbothered" by the concept of IHT - not for me personally - my parents estate was less than £1million - but for my own kids. I did look into all sorts of schemes to mitigate IHT and came to the conclusion that the best thing was for them to just pay whatever IHT was due.
After all, between £1million and £2million it's £1million + 60% of the remainder and over £2million it's a figure I haven't bothered to work out, but it's still a heck of a lot of money.
The hard bit is how the IHT is actually paid, as it needs to be paid before you can get probate. That's where I would be focusing my energies.
You also don't mention whether or not you have LPOA for your surviving parent and whether or not they are on-board with any IHT mitigation plans you might concoct. If you plan to use your LPOA powers then you need to be aware that "No self benefit" is one of the over-riding obligations.
I have recently become very "unbothered" by the concept of IHT - not for me personally - my parents estate was less than £1million - but for my own kids. I did look into all sorts of schemes to mitigate IHT and came to the conclusion that the best thing was for them to just pay whatever IHT was due.
After all, between £1million and £2million it's £1million + 60% of the remainder and over £2million it's a figure I haven't bothered to work out, but it's still a heck of a lot of money.
The hard bit is how the IHT is actually paid, as it needs to be paid before you can get probate. That's where I would be focusing my energies.
You also don't mention whether or not you have LPOA for your surviving parent and whether or not they are on-board with any IHT mitigation plans you might concoct. If you plan to use your LPOA powers then you need to be aware that "No self benefit" is one of the over-riding obligations.
alscar said:
Parent 1 sadly dies and presumably / usually (?) leaves everything including the house to the survivor.
At that point nil IHT due or payable.
Parent 2 then equally sadly passes away and everything left to the estate including the value of the house. At that point if the total value is say £2m for ease of numbers ( or less ) including the principal residence then total IHT allowances is 2x £325k plus 2x £175k ( assuming the house is left to the direct descendants ie children ) or £1m in all,Surplus is £1m and current IHT then payable is at 40% or £400k.
Gap between parent 1 and 2 matters not.
There will be some caveats / nuances to that depending on what the assets left actually are and some are IHT tax free if more specialised tax relief schemes.
After April next year any unused pension pots if private ie not DB scheme also go into the calculations.
Wife and I are just about to sign off on our new (replacement) Wills. Obviously, we have used a firm of solicitors. For the first meeting we provided summary financial details and history of gifting for the two of us, none of which is complex, and the subject of IHT came up. I asked for a detailed IHT calculation on the successive deaths. Broadly, this confirms what alscar has said. No real issues on the first death but substantial IHT on the second death. Any past gifting within 7 years will reduce the available amount of NRB, and anything over £2m reduces any RNRB by £1 for every £2 over £2m. There is likely to be substantial IHT to pay but I keep reminding myself that the remaining 60% of the estate (a significant sum in itself) will go to the beneficiaries. At that point nil IHT due or payable.
Parent 2 then equally sadly passes away and everything left to the estate including the value of the house. At that point if the total value is say £2m for ease of numbers ( or less ) including the principal residence then total IHT allowances is 2x £325k plus 2x £175k ( assuming the house is left to the direct descendants ie children ) or £1m in all,Surplus is £1m and current IHT then payable is at 40% or £400k.
Gap between parent 1 and 2 matters not.
There will be some caveats / nuances to that depending on what the assets left actually are and some are IHT tax free if more specialised tax relief schemes.
After April next year any unused pension pots if private ie not DB scheme also go into the calculations.
As always, its best to plan for IHT mitigation as far as ahead as possible.
R.
The Leaper said:
No real issues on the first death but substantial IHT on the second death.
You could always try spending more and enjoying yourselves. Sadly we never do (although I'm trying to) and these days there's a need to go extra size on shroud pockets with the velcro back for HMRC to reach in 
Armitage.Shanks said:
You could always try spending more and enjoying yourselves. Sadly we never do (although I'm trying to) and these days there's a need to go extra size on shroud pockets with the velcro back for HMRC to reach in
This is bang on, and also very sad, as I told them to get help at home earlier, and do some holidays etc, but they were always very frugal. It's worked, in that there is no worry for provision of care (not going down the it would be provided free if less than 23k of assets debate) but equally having worked hard and paying tax again to pass on AND (this scares me most) having to pay the the bill in order to see the probate grant. I am told that some banks will pay before from the estate direct to HMRC, but I am hoping that is a problem for some years away.the_g_ster said:
This is bang on, and also very sad, as I told them to get help at home earlier, and do some holidays etc, but they were always very frugal. It's worked, in that there is no worry for provision of care (not going down the it would be provided free if less than 23k of assets debate) but equally having worked hard and paying tax again to pass on AND (this scares me most) having to pay the the bill in order to see the probate grant. I am told that some banks will pay before from the estate direct to HMRC, but I am hoping that is a problem for some years away.
Pretty much all banks have a limit below which they will pay the balance - to the executors, not HMRC - without probate. This limit varies from £5k to £50k.The only financial institution that I am aware of that will pay HMRC directly is NS&I.
I've also read that when SIPPs come under IHT, the money in a SIPP can be used to pay HMRC before probate, but that is as yet untested.
Our IFA's view when asked on IHT is that HMRC more or less have you over a barrel, and by far the best course of action is to spend more or give it away at least 7 years before you die. There are schemes that can be used to potentially reduce liability but they all have some downsides.
One simple thing I will look at doing is a deed of variation when my remaining parent dies, so the money goes straight to my kids without risk of going through our own estates.
One simple thing I will look at doing is a deed of variation when my remaining parent dies, so the money goes straight to my kids without risk of going through our own estates.
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