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Legal, pensions and money

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

(88 Posts)
Birthto110 Sun 25-Feb-24 10:49:57

If your estate was well over the IHT threshold and had far more money coming in than going out monthly, due to substantial pensions, and a house owned outright with no expected repairs, would you want to do something about the excess over the IHT (following advice from people like Martin Lewis? ) . This stuff is in the news a lot but then we also need more of people's taxes in the public coffers to pay for failing public services.
Eg For people in their (let's say) 80s , in this situation, the advice is often to spend more on things you enjoy while still healthy - or gifting to charity or to younger family members to help them out - or to a political party etc These are the things advisors suggest or else large chunks will just go to tax anyway, if it just sits there over IHT and the savings keep accumulating every year.
No need to do anything at all of course - after all if carer fees come along then the costs of care might eventually reduce the excess below the IHT threshold - and might even eat up all savings and the house.
Myself I know I would want to put any savings above IHT to good use at the end of my life and can think of charities and people I'd dearly like to help. But someone told me recently that this is not a responsible attitude as everyone should pay their taxes - but the way I see it the taxes have already been paid once while working - !! So many smaller worthwhile charities need support (not thinking of the bigger ones). Interested in your different perspectives.

keepingquiet Sun 25-Feb-24 11:04:50

It is good to read from someone who seems to have made the right financial decisions in life, or at least to have been very fortunate but not to have squandered what they have.
I own my home outright, have modest savings but find I am struggling on my state and work based pension which I have only just started claiming.
I really want to have my bathroom updated and could use my savings for this but like you, I fear that once they are gone there will be nothing left for a 'rainy' day.
You sum up the quandary well- none of us can predict if we may need savings to pay for future care, or whether we will die tomorrow and leave our kids with a lot of responsibility on their shoulders.
For me I have worked fifty years of my life, have always paid tax and still do. It doesn't bother me a jot because I am a user of the services my tax goes to pay for, or maybe, or know people who are, and I do believe we live in a welfare state where we all make a contribution for the good of society.
So my perspective is this:
I need those savings I have and will leave them where they are
I will try to pare back my spending so that I am able to treat myself now and again to a holiday.
I will carry on giving to charities through my bank because I know there are so many people so much worse off than I am.
I think you should maybe head for a middle way- do a little of all the things you mentioned, especially spending some on yourself!

Calendargirl Sun 25-Feb-24 11:18:48

We recently went on holiday, an 8 hour flight, and flew business class. First time we have done so.

The difference! Shall spend some of our savings on doing the same in future. What the hell!

annsixty Sun 25-Feb-24 12:14:59

IF I had adequate savings, not up to IHT level I must add, I would definitely be using it on private healthcare and help in the house and garden.
No waiting for years on NHS waiting lists.
Money earned by hard work and saving through the years should be spent looking after oneself.
This may not correctly answer the OP but I am never going to be in a position where I have to think of sums of money exceeding £1million.

Whiff Sun 25-Feb-24 13:18:58

keepingquiet do you need your bathroom altering for health reasons if so get in touch with your local council as they may have grants that you can have. Also if you need it on health grounds as long as your have a tradesman fit it you can get the VAT back on fittings that's toilet,hand basin and tap and shower cubicle or bath . I paid to have my new shower room . I had an ease toilet which looks like ordinary loo but taller ,large rectangular shower and cubicle new shower,hand basin inset into cupboard at waist hight ,hand on the walk by the loo and handle in shower cubicle. I got £550 back. Didn't get VAT back. on my shower chair as it wasn't from the same company .

If you get in touch with occupational therapy then you could have your bathroom altered by the council but you have to have what they fit. They will be a waiting list.

I paid for mine as I knew what I needed for health reasons. But the home improvements team who did it sent me to trade places and I had their discount saved £3,000 on my shower room and the same ofgb when they did my kitchen.

I know this is off track of OP but you mentioned bathroom and money . Hope it's of some help. I own my bungalow out right. Don't get my state pension until end of April .

M0nica Sun 25-Feb-24 13:45:26

What makes you think that the money paid in IHT will not be put to good use?

TinSoldier Sun 25-Feb-24 13:53:35

I’m in that position. My entire estate is willed to a variety of good causes - should there be anything left if I have to pay for an extended period of care.

In my lifetime, I will have a paid a substantial amount of direct and indirect taxes. I don’t have any control over how my taxes are spent so dying will be my opportunity to make sure my money goes to the causes that I care about, ones that receive no government support. Meantime, I make regular donations out of income.

foxie48 Sun 25-Feb-24 16:22:40

We make regular donations out of our of income to charities and I like to be generous to my two children and grandchildren. My younger daughter is quite well off so I tend to suggest little holidays and trips that we can do together and I pay. It means we have lovely times together whereas my older daughter prefers the cash! I don't know if there will be IHT to pay when we die but if there is, I don't have a problem with that. It's like paying tax, you have got to earn it to pay it and I think we'll have looked after our family pretty well over the years.

Sandytoes Sun 25-Feb-24 16:34:42

I am not suggesting any if the posters are confused about IHT but I have found when that when it has been discussed by friends there is an unawareness about spousal allowance transfer and also the increase if property is given / willed to children. These can increase the threshold substantially in the correct circumstances.

Sandytoes Sun 25-Feb-24 16:58:49

*of the posters

keepingquiet Sun 25-Feb-24 18:06:34

No I have no disabilities and there is no money available to me. I found this out already.
The option I have is to wait until I'm decrepit and get some help, or cough the money up myself which will take half my savings.
Still not sure if I should be bothered...but thanks for your response.

Casdon Sun 25-Feb-24 18:56:13

The equation you need to make is, given that if you do need residential care you will still be receiving your pensions, how much are you likely to need to top that income up to pay for your care? The value of your house will also matter, because if it has to be sold to help pay for your care then any surplus will be subject to IHT. There’s no purpose in having savings on top of the house value that you are never going to need.
The advice Martin Lewis gives is very sensible I think.

Birthto110 Sun 25-Feb-24 22:40:44

So if it's a choice between a) doing nothing and almost certainly having your estate be liable to IHT or b) to start spending the surplus over the threshold and /or gifting in one way or another - which do people opt for? A or B.
To pay the tax or to try to spend/gift to avoid the tax?

maddyone Sun 25-Feb-24 22:52:36

We are already spending and don’t scrimp by any means on what we buy/do and we share what we have with our children. Two of them absolutely don’t need any help so we buy nice gifts and we’re generous with all four of our grandchildren. As our daughter is going through a difficult divorce and has an ex who refuses to pay anything towards the children, we help her out a lot. We actually bought her a new car for Christmas because the car she was driving was unsafe, and we want her and the children safe. I couldn’t sit on money and watch my child and grandchildren suffer in any way. And I don’t want a single penny of mine going to the taxman. We’ve both paid our taxes all our lives and still pay tax now. It’s enough.

maddyone Sun 25-Feb-24 22:53:21

If we need residential care, we’ve got the house.

Doodledog Sun 25-Feb-24 23:18:22

Call me cynical, but I always wonder whether the government watch (or even start) threads like this near election times to judge the reaction of posters on different platforms.

Birthto110 Mon 26-Feb-24 07:50:56

The govt probably watches everything ! You're right there. But with so many more older people now predicted to sit over the threshold IHT wise, without even realising it, even with the the non taxable transfer between spouses, then seems likely that (with the house price values having gone up and up in the past making huge profits for some ) this discussion is important. It's always assumed that the whole family is well-off if people fall into that bracket - but the younger generations in same families can be certain they will probably never afford to buy, unless on top earnings. So, unlike in previous decades what happens going forwards to pass more support down the generations is important - unless people prefer savings to go to the taxman for other things, fair enough, people have different view on this. Was reading yesterday that they are paying some rail employees (200 of them ) full pay for a Govt project that doesn't yet exist. Reported in i newspaper a couple days ago. Doesn't fill you with confidence.

keepcalmandcavachon Mon 26-Feb-24 08:59:35

"Call me cynical, but I always wonder whether the government watch (or even start) threads like this near election times to judge the reaction of posters on different platforms."

I don't think you are cynical Doodledog but do beware
The Rabbit-Hole of Madness grin

maddyone Mon 26-Feb-24 09:14:20

We’ve been lucky enough to inherit two, not by any means huge, legacies last year. The downside, my mother died and my father in law died. Neither was rich, but both managed to buy houses when they were married, normal houses, three bed semis, and both had saved a bit too. They wouldn’t spend too extravagantly and as both ended up in care for their final year, they had sufficient resources to self fund, which meant we could find lovely homes for them. My mother’s cost £60,000 for the year, but I think it would have been more now. I was just glad she was in a nice place. But I’m not going to leave that hard worked for money for the government to squander, I’m sharing it with my children.

Katie59 Mon 26-Feb-24 09:14:51

You can spend on comforts, holidays, house improvements and luxuries if you want, it’s your money spend it as you wish.
Be very careful with gifts if you need care they may be reclaimed there is no time limit to this.

We are living now into our 80s and beyond our beneficiaries are often retirement age, do consider helping younger members of your families sooner.

maddyone Mon 26-Feb-24 09:22:40

If we need care Katie and there’s no money left, we will use the house. The children don’t/won’t need it. Anyway I think we’re below the limit to pay IHT even with the legacies, but the problem could arise if the house increases in value a lot. I don’t want that to happen.

maddyone Mon 26-Feb-24 09:27:08

I know someone who said she’s getting rid of all her money so if she or her husband need care, they’ll get it free. I asked her if she’s seen the free homes! Anyway she’s got a house and she can’t rid of that.

Doodledog Mon 26-Feb-24 10:31:22

I was under the impression that free homes were the same as ones with fees, and that fee-paying residents were side by side with those getting free care. In fact the fees are higher for those who pay them as they subsidise the free places*. Is that no longer the case?

I remember my grandparents were in that situation, when they went into sheltered housing (not care, I realise) after my grandad had a stroke. They had to pay until they had nothing left, and were next door to an old neighbour who hadn't saved a penny whilst my grandparents did without for decades to save 'for their old age'. I wouldn't have wanted to see Betty-next-door go without, but it was a real slap in the face for my grandparents, as they were so proud of doing as much as they could to look after themselves, whilst Betty went on holiday and ran a car etc.

*I know that the places aren't actually free. They are paid by councils out of council tax, so the fee-payers pay twice - once through their CT, and again at point of use. Something really needs to be done to make the system fair.

maddyone Mon 26-Feb-24 11:14:03

It’s complicated Doodledog as we found out when looking for a home for my mum. Councils will only pay up to a certain rate, which is several hundred pounds per week less than fees paid by residents. Consequently councils will not place a person into a more expensive home, which from our observations (we visited several) were not as nice as the more expensive homes and seemed to have a lot less going on for the residents to take part in. If a person has been resident for a minimum of at least a year, council funding would allow the resident to be left in the home because it’s too disruptive to the elderly person to be moved. However the council will still only pay the reduced amount and so homes want to be sure that the person has sufficient funds to self fund for a minimum of a year. If they self fund for say, six months, the home will insist that the resident be moved to a cheaper home, which is very unsettling for an elderly person. As I said, it’s complicated.

We visited one cheaper home and my husband said to me as we left, You wouldn’t put a dog in there would you?’

maddyone Mon 26-Feb-24 11:19:13

After my dad died, my mum moved south to be near to me, and she moved into a sheltered apartment, but she bought it out of the funds released when she sold her and dad’s house. She loved it, lots going on, and very safe, and near family. Even during Covid she was okay until she fell and broke her shoulder. That was the beginning of her end.