Over the IHT threshold? Reduce it down - or do nothing?

Unlike Newnanny we are not wealthy. We are comfortable and own our own home. We gave our dc money towards a house deposit and a second hand car each. I’m so glad that we can help our dc out because they need help now not when we’re both dead. We struggled when our children were young and a little financial help would have made a huge difference. Unfortunately I have terminal cancer and according to my doctor I have 6 months left. I’m determined to prove him wrong though. We took our dc and dgc away several times last year for long weekends in Airbnbs because we think the memories we are making are more important than any money.

Only one mention of equity release. It is something to be t thought about if you wish to make alterations to your current house.

One friend, whose husband developed Parkinsons, decided to release some equity on her house so that they could fly to New Zealand to visit their daughter and also take some other holidays. They had an enjoyable time (business class to NZ) and a while after her DH died, she sold the family home, repaid the money released and was able to buy a smaller house in a nearby village. She had no regrets at all.

It's very unfair because you have already been taxed on this money whether income or savings interest.

If you have inherited the money you will already have paid a large amount of tax after probate. Then when you die your children pay another whack so the government had now got 3 lots of tax from you!

Germanshepherdsmum

I found newnanny’s post pretty offensive and unnecessarily detailed given what some here have posted about their financial situation. Instead of boasting about all the properties she and her husband have, how many bedrooms they have, what is or is not owing on mortgages and their largesse towards family and just a couple of charities and a kid in Africa she would do well to pay attention to the huge IHT bill they will face if they don’t get rid pdq and give more to charity. I don’t think I have ever read such an unpleasantly boastful and tactless post.

I thought the same.

Ikesgranma - what a lovely post . Life is not in the doctor’s hands. I hope you prove them wrong

I agree GSM, Newnanny's post was tactless, at best. I do rather resent the inference that those of us without a buy to let empire and a substantial holiday home have somehow failed in life.

Newnanny anyone who is fortunate enough to have the assets you have should be sharing your good fortune with your family and others.

There are many ways you can do that quite legally and above board. The extensive property you have you will pay either CGT or IHT on you can use it much more usefully than you do now.

kircubbin2000

If you have inherited the money you will already have paid a large amount of tax after probate. Then when you die your children pay another whack so the government had now got 3 lots of tax from you!

Not always the case. Neither my parents nor my husband’s had enough money to pay any IHT.
But I agree it is money that they earned and paid tax on, including on the money with which they paid their mortgages. Our parents were not wealthy by any stretch of the imagination, although I’m pleased that in their later years my parents went on a number of cruises and a couple of long haul trips to Canada and America.

Have just been looking up a short video by Martin Lewis concerning IHT.

It’s very reassuring.

Those of us who don’t have buy to let properties - not difficult to buy if you could afford a small deposit and get a mortgage, relying on rental income to make the payments - are, I would say, sensible. The costs which can be offset against income tax have been eroded, obtaining possession is likely to become more difficult shortly, and you pay CGT on any increase in value when you sell or give it away. I don’t envy anyone who boasts of having btl properties.

Maddyone.
I was referring to people who will fall within the Inheritance tax bracket who have a large sum. Its sickening to see it disappear after family have tried to build up an inheritance for kids but have not taken financial advice.

Can we hope that those who delib run down their funds to the £23k mark will not complain when their dustbins are emptied less frequently, their hospital roofs fall in, there are no nurseries for their grandchildren, their roads are more pothole than road etc etc. Or propose better ways of funding public services?
There’s some hideous I’m-all-right-Jack-ness running through this thread.

There’s only a 4% chance that any one of us will need residential care after the age of 65 winterwhite. Perhaps the IHT of those who choose to hang on to their savings already pays for the care for those who don’t?

I think that's a misconception, although I've seen it said by people who will probably know more than me (that's everyone!)

It is the case MissA. Here’s a report which gives the figures, the chance of needing residential care rises as you grow older, but the number of people in the age group diminishes too, so it’s 4% of the total over 65 population.
www.mha.org.uk/get-involved/policy-influencing/facts-stats/

Oh yes, I don't doubt that, but I was thinking about the idea that those who pay are "keeping" those who don't.

Germanshepherdsmum

In my experience those with the most money are the least likely to spend it.

That's why they end up with so much!

kircubbin2000

Maddyone.
I was referring to people who will fall within the Inheritance tax bracket who have a large sum. Its sickening to see it disappear after family have tried to build up an inheritance for kids but have not taken financial advice.

Ahhh, yes, I agree kircubbin.

According to advice columns people are allowed (for tax purposes and IHT planning etc) - to gift £3000 away every year and if they haven't used the allowance last year it can be carried over - ie £6000.
Plus £250 as many times as they wish to gift - and £2500 for a granchild's wedding etc - All those things are tax exempt. Plus any monthly surplus income above bills/needed to maintain comfortable lifestyle can be given away without attracting tax scrutiny. As I understand it. Best to check!!
The £3000 gifting allowance figure strangely hasn't changed for years and years and hasn't kept up with inflation - so the govt isn't exactly encouraging people to gift - they'd probably rather reap the benefits through taxing where they can, when over the thresholds.

Other question:
Separately - re care home fees, the equity release market has been busy for years -eg for those who want to release cash from their homes for holidays /a new motorhome etc - and since arguably that depletes funds , isn't that in danger of being considered a ''deliberate deprivation of assets''? The biggest loser from equity release schemes is after all (potentially) councils who end up paying for care costs if there's nothing left of the house. Anyway that's a separate matter but I can't help wondering if they have similar rules in other countries and whether equity release is as big a thing in other countries. The companies use very strong selling techniques - we have the paperwork we sorted for a relative and I think they referred to it a 'cash reserve' and sent regular letters saying 'you haven't used all your cash reserve yet' as if the money had already been given to them and was just waiting to be used , whereas in fact it was just another (expensive) loan each separate time money was withdrawn!! We found several mobility scooters which weren't needed. It got pretty frightening for them in the end- and towards the end the 'tone' of the letters was less friendly and more about the cumulative interest!! Money is a scary thing.

maddyone

kircubbin2000

Maddyone.
I was referring to people who will fall within the Inheritance tax bracket who have a large sum. Its sickening to see it disappear after family have tried to build up an inheritance for kids but have not taken financial advice.

Ahhh, yes, I agree kircubbin.

My husband who has always been self employed commented on this, “it’s not hard to make money but it IS difficult to hang on to it.

His point is there is always someone who needs paying including the taxman, so you don’t spend when you don’t NEED to.

I think everyone should spend when they need to and not have to worry about the taxman or the need to preserve money in case they need care. Re equity release, my husband has always said we should never do it. The terms of repayment are dire. If we need care we’ll use the house if necessary, or any monies we have. If one partner is still living in the house then the fees can be allowed to be paid when both are gone I understand but I expect the interest would be huge. I know my sister and her husband had to pay over £20,000 in outstanding care home fees, from the sale of the house when her mother in law died. I don’t know how other countries arrange this or if they allow gifts to be given tax free. In the UK the IHT starting point hasn’t risen for donkey’s years, despite the rise in property values. David Cameron promised to raise the starting point on IHT when he became MP but he didn’t. What he did do as understand it, was introduce the spouses rate, the £175000 ( I think that’s the figure) that can be used by people to leave their houses to their children. I think the house must be left to the children otherwise the extra amount is not applicable, so it means we can’t leave anything to our grandchildren otherwise the rate drops back to the £325000.
I think.

I’ve just been reading about the Laffer Curve which states that there is a maximum tax take after which revenues start to fall.
As I understand it means that if personal taxes are reduced the more people feel able to spend thereby boosting the economy.
There’s a lot more detailed information on the internet.

We will be caught by IHT and, as we have no close dependants, will probably go down the equity release route.

Charitable bequests are taken into account before calculating IHT, if you have no close family.

Susie42 The Laffer Curve has been quite extensively challenged and debunked.

I will give one link ctmirror.org/2018/01/18/why-the-laffer-curve-is-garbage/ There are hundreds more.