IHT- how to avoid if you have enough wealth

Witzend

One thing we’re doing legally, is putting a fair bit of cash into S&S ISAs for the Gdcs. They will have access at 18, which is slightly worrying - eldest is now 9, dh and I will be 84 and 85.

So in case we’re gone by then, TBH not unlikely, I shall be leaving letters pleading with them not to blow the lot!

We contribute to the savings accounts my daughter has set up for her two children.
She made me laugh when she said she wasn't happy about our granddaughter potentially being able to blow it all on shoes and handbags when hers matures, can't think why she would think anyone would do this! 🤔 🤣

paddyann54

People seem to forget that if they paid a mortgage over 25 years their house cost a lot more than it said on the deed!Sometimes several times the cost

Yes, very true. Good point.

Has anyone worked out the actual cost of their property?

Allira

paddyann54

People seem to forget that if they paid a mortgage over 25 years their house cost a lot more than it said on the deed!Sometimes several times the cost

Yes, very true. Good point.

Has anyone worked out the actual cost of their property?

We paid 2 1/2 times more in mortgage payments than the price of our house, added to the cost of renovations and upkeep at a rough guesstimate we have invested five times more than the price on the deeds

Working out the cost of the loan would have to take into account any tax relief that was claimed when paying a mortgage, but I'm sure a formula could be arrived at that would do that, as well as factoring in inflation, average wages and other relevant figures. The fact would still remain, however that those who bought at a particular time in particular areas have made capital gains that were not a result of work.

I agree that the lower threshold for paying tax should rise, as should the amount paid at the top rate, but that still assumes that it is those earning an income who should bear the main burden of tax, when workers also contribute their time and the goods and services their work provides, and pay for the ability to do so - in commuting costs, childcare charges, work clothes etc. I would prefer to see a fairer way of collecting tax from everyone able bodied and not caring for the sick or disabled, so a choice not to earn an income does not equate to a choice not to contribute financially to the benefits of living in a civil society.

I don't think that a radical change like that could reasonably be imposed retrospectively, however, as people make choices based on the prevailing circumstances, but IHT is rather different, as by definition it takes nothing from the people paying it.

I hope my grandchildren do blow every penny we’re saving for them. It’s purely fun money, in my view.

I believe in n paying tax. I have no respect for those who evade it, particularly when it is on unearned income (and yes, house and land value based wealth is mainly unearned (and the ‘mainly’ is why there’s a threshold, of course))

That said, I think there’s a lot of scope for far more effective and redistributive taxes (indeed for a more redistributive tax system across the board) including a land value tax, but there is no sign so far that this government has the appetite for anything genuinely transformative.

Doodledog, I agree that the lower threshold for paying tax should rise, as should the amount paid at the top rate, but that still assumes that it is those earning an income who should bear the main burden of tax, when workers also contribute their time and the goods and services their work provides, and pay for the ability to do so - in commuting costs, childcare charges, work clothes etc. I would prefer to see a fairer way of collecting tax from everyone able bodied and not caring for the sick or disabled, so a choice not to earn an income does not equate to a choice not to contribute financially to the benefits of living in a civil society.

I agree, there must be a way -- Oh yes, tax as a family/couple on total income - not per person. As a family OR as a person, their choice.

NotSpaghetti

Do people think that those people with nothing, didn't work hard - the same as anyone else.

Even those with nothing to show for it (maybe especially those) can have worked extremely hard.

There is a lot of smugness around "hard work" it seems.

Just saying.

I feel, like M0nica, that those that have to pay it are actually the lucky ones.
Same for higher rate income tax and so on...

Well said NotSpaghetti. More or less what I was going to write.

NotSpaghetti

Do people think that those people with nothing, didn't work hard - the same as anyone else.

Even those with nothing to show for it (maybe especially those) can have worked extremely hard.

There is a lot of smugness around "hard work" it seems.

Just saying.

I agree.

I also can't imagine why it matters one has "not earned" during home ownership. Homes cost much more than purchase price.

Not all homes have skyrocketed.

The last home sold near ours priced considerably South of £200,000 -- we'd have earned more saving at interest or investing in something else.

Norah

NotSpaghetti

Do people think that those people with nothing, didn't work hard - the same as anyone else.

Even those with nothing to show for it (maybe especially those) can have worked extremely hard.

There is a lot of smugness around "hard work" it seems.

Just saying.

I agree.

I also can't imagine why it matters one has "not earned" during home ownership. Homes cost much more than purchase price.

Not all homes have skyrocketed.

The last home sold near ours priced considerably South of £200,000 -- we'd have earned more saving at interest or investing in something else.

Re the last para - in that case and yours is similar in price to the one sold then you will likely be outside the scope. Unless you've a few Hockneys on your walls.

Notspaghetti "I feel, like M0nica, that those that have to pay it are actually the lucky ones.
Same for higher rate income tax and so on..."

I remember back in the mid 70s I took on a client who was a designer. Her (male) partner persuaded her to appoint an accountant who had a Rolls Royce. He charged them several hundred pounds for a VAT registration. She was gobsmacked at this because they just didn't need an accountant at that sort of level. So they came to me.

Whenever a client moaned about paying tax I always told them that they were lucky to be making sufficient profit to have to do so.

I also can't imagine why it matters one has "not earned" during home ownership. Homes cost much more than purchase price.
True, but it’s those who don’t want to pay tax who go on about how they worked hard to pay for their homes, when on the whole they have just lived in them and made them as pleasant as possible whilst they did so. If a house is worth over a million the chances are that it wasn’t bought and paid for with a mortgage of that amount. It will have been bought with an inherited deposit or bought much more cheaply and increased in value over time. Nobody is suggesting taking that away - just taxing the percentage that is over the allowance, which is applicable to something like 4% of the population.

Of the 4% of estates that pay IHT the majority would be marginal payments, those with a lot of assets have either gifted or sold much of their wealth over the years, if they have sold them CGT would have been paid.

Apart from benefits and health a lot of money has got to be spent on climate change and water management, I’m not sure the measures being discussed so far are enough. Voters want all these improvements but don’t realize how costly they are.

Not everyone who reaches IHT levels has earned what they have. I am not talking just about the extra value in their own houses but many of us who hve lost our parents over the last 20 plus years, where they owned their own house have benefitted from inheriting money from the sale of our parents' house.

When my father died, the value of his home meant we paid IHT on his estate, as well as inheriting a significant sum, which has contributed to putting our estate in the IHT zone.

What is the hang up with peoples houses?

I am more concerned about savings accrued over a lifetime along with pension funds. Consecutive governments have encouraged us to save for our retirement and care needs. If we die before needing to pay for care, I see absolutely no reason why the a government should have my money.

Perhaps we should have spent it all on frivolities and rely on the state, as opposed to being prudent and wishing to take care of ourselves and our families?

I am surprised that anyone over 90 years in the Uk will have any inheritance left to tax. Care homes and full time care at home are expensive. Using up savings and then equity release will mean there’s less to pay on inheritance tax.

Not everyone will need to go into a care home.

The fees can be exorbitant and quickly use up any savings including those from the sale of the family home.
What then?

ronib there are lots of "over 90s" who are doing well though like my mother-in-law.

She has a cleaner once a week, a gardener once a week and us.
She lives alone in a 3 bed house which she moved to at 95 or 96.

She isn't exactly "fit" but she is most definitely still independent!

Only one person in 10 ends up in a care home. My father lived until 92 and never came anywhere near needing to go into care. His sister is living at home at 96.

I live opposite a centenarian, still living at home and walking his mile a day.

With the average price of a house at £285,000,( I know this hides immense variations from region to area), average stays in care homes vary from 7 years at 65-70 to 3 years at 90.

If you are unfortunate enough to go into care when relatively young, it can eat up that money, but for many people with shorter stays, especially after you deduct basic pension and AA, which amounts to roughly, £14,000-14500 a year from the annual cost - and for those with occupational pensions, they may contribute a significant amount of the weekly cost.. There should be a reasonable amount of the estate left to distribute to legatees.

This is not denying that for some families, care costs can wipe out any inheritance, and that many are dependent on the state paying for care, but these things should be seen in proportion. Many people do not go into care and many are not there long enough to make huge inroads into their assets, in whatever form they take.

Monica care at home costs can also be significant varying from £25 to £38 per hour. It’s not unheard of to be charged around £700 plus a week for enhanced
care packages at home plus the cost of cleaners, gardener, general repair etc. Heating can be a significant cost too even for apparently wealthy pensioners. So for the elderly in need of support in their own homes, saving pots can disappear very quickly too.

We are taxed on our earnings and I do not think we should be taxed on any interest we make when we invest those earnings.

I receive a full state pension because I didn't opt out of the full women's stamp in the 1980's and also receive my late husband's private pension but am now being penalised for planning for the future when we were young to ensure we had a decent retirement. Because we did that I now lose out on the Winter Fuel Allowance and any other benefits that are available.

The system only provides for people who never took the initiative to provide for their future and for illegal immigrants who have never contributed to the Great Britains coffers.

We should have spent, spent, spent instead of ensuring we had a decent retirement and let the government pay for everything.

Care at home is just as expensive. A friend of myMum’s had a live in carer (2 weeks on, two weeks another carer). On top of her wages,she had to feed her and then there were also all the usual running costs of the house.

Most importantly you really have to get on with the carer or it can be unpleasant having a stranger in your home. At least in a care home you have a team of carers.

I agree with Maddyone and GrannyGravy13 although my estate will not be great enough to attract IHT. I want my property to go to someone I have designated and not to the grubby hands of the taxman. Too much of my tax money has been squandered on foreign wars, foreign warlords and groups of which I strongly disapprove.

The tax inspectors are only carrying out the laws made by governments.

NotSpaghetti

ronib there are lots of "over 90s" who are doing well though like my mother-in-law.

She has a cleaner once a week, a gardener once a week and us.
She lives alone in a 3 bed house which she moved to at 95 or 96.

She isn't exactly "fit" but she is most definitely still independent!

A good friend of mine 80 had an aunt who died 96 at home, steadfastly refused a care home, the house hadn’t been touched for 50yrs and the garden wasn’t much better. He was only beneficiary ended up with £500k after IHT, he was already wealthy, self made, he died 5 yrs later his (younger) wife had the lot, tax free.

I lost touch, but she was capable of spending prolifically, must update myself on her.

Primrose53

Care at home is just as expensive. A friend of myMum’s had a live in carer (2 weeks on, two weeks another carer). On top of her wages,she had to feed her and then there were also all the usual running costs of the house.

Most importantly you really have to get on with the carer or it can be unpleasant having a stranger in your home. At least in a care home you have a team of carers.

We looked into live-in care for an aunt of dh, who’d have needed help at night (going to the loo) as well as in the day. TBH it was going to work out even more expensive than a nice care home, which was where she eventually ended up.

I don’t know whether many people still take out annuities to help to cover CH fees. My sister, who had P of A for our mother, did take one out - to me it seemed an awful lot of cash to fork out at the time, but thank goodness she did. My DM’s own income was taken into account, but the annuity guaranteed to cover the rest of the fees until she died.

She was very nearly 89 when she moved to her care home (Alzheimer’s) and went on to just over 97. I had never expected her to last so long - although she came from a long lived family none of them had made it past 90.

Having worked it out, my sister said we ‘broke even’ at roughly the 4 year mark. Of course the annuity provider had wanted her full medical history before making an offer (or calculated bet) on how long she was going to live, so it did take a while.