Inheritance Tax.

I am another one that will expect our children to just cough up the tax if it is due.
An inheritance is not earned so should be taxed as unearned income.

We are the generation that will (or already have) inherit property to sell. Most of my peer group have already been given such a financial boost - some younger than me. They buy expensive cruises, a new car, revamp their homes etc. My mum used to say ‘it takes a generation to earn it and a generation to spend it’!

I’m not quite sure where I stand on this topic. Many people I know have inherited property. Some of course will not.

But then life was never fair.

My mother died last year and I will inherit a large sum - unexpected as I thought most of her money would be used to pay her care home fees.

I have made careful provision for my own future and do not need this inheritance. I plan to make a deed of variation to pass the inheritance directly to my children rather than make large gifts to them, which had been my first thought. That means the money will not count as part of my estate for IT when I die.

My children will have to pay IT anyway as my bungalow alone takes me above the limit for a single/divorced person - unless I have to sell it to pay care fees!

Don't forget that you paid tax on the income that you then use to buy goods and services subject to VAT with, to tax your car, pay your TV licence, renew your passport etc. etc.

The 'I've paid income tax so shouldn't be subjected to any other tax on my money' argument is completely specious.

Income tax is not the only tax.

My estate will not reach the IHT bracket, but even so, I have given my adult children money in recent years, when they needed it. It was money I had inherited from my parents.

I am in good health but at 77 you never know what is round the corner, so they wont be getting any more until I die, just in case I need it to pay for my care.
I would hate to think they might be chased for money if I gave it to them and it was now considered as deprivation of assets. I would rather fund my own care, as far as I can, rather than depend on local authority funding.

If confused regarding inheritance tax - question your solicitor.

People often seem confused about the rules on deprivation of assets to reduce care fees and the rules on giving away assets to reduce inheritance tax. Entirely separate matters.

www.ageuk.org.uk/globalassets/age-uk/documents/factsheets/fs40_deprivation_of_assets_in_social_care_fcs.pdf
Here is a fact sheet on deprivation the system is very vague and you can’t anticipate in advance wether or when you will need a care home

My earlier post was to warn of the dangers of trying to reduce liability for IHT. Many schemes are legal, but could be classed as immoral? Yes, we paid tax on our incomes to buy our properties, but other than sitting tight, did very little to earn some of the now immense profits.
I’ve a friend in deep financial trouble, as the local Council is chasing her to repay money her Mother ‘gave’ her years ago. Mother needs residential care and the Council wants that money back.
Legal/financial advice always, not just heresay.

Inheritance Tax began its life as Estate Duty and was the main reason that the large feudal estates were broken up, they could no longer be handed down to the next generation. After WW1 many great mansions were sold, given up or demolished and only a few remain in private hands.

Business wealth can be handed down to the family, it’s private wealth that gets taxed, families with spare cash have lots of advantages and taxing inheritance is fair.

welbeck

i think the objection is that most people have already paid income tax on that money they managed to save or invest in their house.
it seems an unfair tax to me in many ways.
i wouldn't object to higher rate income tax increasing.
those with higher incomes could pay more without hardship. which would help society generally.
but as to IHT, specialist advice should be sought.

For most people the major investment is their home. Those people who bought their home 20 or 30 or even more years ago are sitting on assets worth a great deal more than they paid and which they have done little to earn the increase.

I remember we bought our first house in London in 1979. It had closing orders on it which meant that it was about to be condemned. It cost £18.5k and probably about £10k to do it up (with my DH doing most of the work, including rewiring, plumbing, installing central heating etc etc.) Had we stayed there we would now be sitting in a house worth £1.25 to £1.5 million. We didn't and our house in Suffolk and then in France did not keep up with the rate of increase in London.

winterwhite

A ducking-behind-sofa comment but I think Inheritance tax a fair tax and a good leveller. I don’t understand people (incl my own DH) who agree that taxes should be higher to fund public services but then move heaven and earth to reduce their liability for inheritance tax.

I agree with you. The beneficiaries have done nothing to earn their inheritance.

I remember older people saying that they were putting money by so that their children could leave it to their children. This is a generation that's no longer with us. They would often deprive themselves and their children were often comfortably off and would use their inheritance to buy a 2nd home, or a motor home or similar.

i think the objection is that most people have already paid income tax on that money they managed to save or invest in their house.
it seems an unfair tax to me in many ways.
i wouldn't object to higher rate income tax increasing.
those with higher incomes could pay more without hardship. which would help society generally.
but as to IHT, specialist advice should be sought.

A ducking-behind-sofa comment but I think Inheritance tax a fair tax and a good leveller. I don’t understand people (incl my own DH) who agree that taxes should be higher to fund public services but then move heaven and earth to reduce their liability for inheritance tax.

My DH and I recently consulted an Estate Planner which was a real eye opener. He came highly recommended and we thoroughly checked out his credentials before hand of course.
One of the many recommendations he made was for our house - instead of being jointly owned 50/50, we are now going to be 'Tenants in Common'. Still 50/50 but more beneficial to our children.... when the inevitable happens.
We've also written a comprehensive Word document to our two children (who we trust implicitly) with all the details of our finances set out clearly. Wills, insurance policies, loans etc. and anything else relevant when we 'pop our clogs' (as we used to say). It's now saved on the Cloud so we can update it and they can see it.
Neither of us is ill or about to shuffle off this mortal coil, we're just an organised pair who always like to have everything organised for peace of mind.
Next project - planning permission for a two story extension. We won't be building it ourselves, but when we eventually Downsize we'll get a better price with planning permission (we'll keep renewing it if necessary) - that's the plan anyway.

Remember gifts out of “income” are not included
If you are lucky enough to have a large pension or other income, which you will pay income tax on, you can gift the part you don’t need.

Take an accountants advice on how much

I recently looked that up too Georgesgran, the legal giving away of assets to fund care.
An old lady I know was advising it to her brother. I wasnt sure it was legal. Like you say, a minefield.

On a different aside - giving lots of assets away, then needing to finance residential care can be an even bigger minefield!

I think so CrazyH - IHT would be due at 40% over your personal allowance of £500K,( as a home owner) or £325K otherwise. As far as I can see from various websites, there’s still the 7 year rule/tapering from gifts made before you die.
Might be worth taking a free 30 minute session with a solicitor to clarify though?

And for single/divorced, is it £325000 + £175000 ?

The threshold for IHT is £325K, so if your spouse dies you inherit his/her estate, the threshold becomes £650K. In addition there’s a main dwelling allowance of £175K, so no IHT due if the estate is below £825K.

Beware of being intestate - no will, where half the estate goes to the spouse, half to children or other relatives, inheritance tax may be liable on their share. The usual best option is a mutual will where the whole estate is left to the surviving spouse but with second marriages that gets complicated.

You need advice and a proper will.

does this help?

www.gov.uk/inheritance-tax#:~:text=There's%20normally%20no%20Inheritance%20Tax,a%20community%20amateur%20sports%20club