max Posted December 15, 2006 Share Posted December 15, 2006 I'll play devils advocate here and suggest that inheritance tax is the perfect tax because you don't pay it until your dead when you don't need the money any more. What you might call a victimless tax. Link to comment Share on other sites More sharing options...
Darbees Posted December 15, 2006 Share Posted December 15, 2006 What you might call a victimless tax. Yes, the beneficiary of a will won't see it that way but it isn't them who pay this tax. I don't agree with inheritance tax in principle but the govt want the money and the alternative is to tax everyone who is alive to make up the shortfall rather than reduce the inheritance of those who are benefitting to the tune of at least £285k. Link to comment Share on other sites More sharing options...
WTAW Posted December 15, 2006 Share Posted December 15, 2006 Here goes: Every living person is allowed to gift £285,000 on death (tax year 06/07) without inheritance tax being paid (this is called the Nil Rate Band). If you have more than this then any thing over that amount will be taxed at 40%. Any assets passing between married/civil partnership couples passes tax free anyway. Therefore the first person to pass away is not using their NRB. If you prepare Discretionary Trust Wills (DT) with I.O.U provisions the first person can "give" their NRB into the DT which the surviving spouse then has the 1st benefit of the trust (together with other beneficiaries usually children). On second death whatever is left in the DT is paid tax free to beneficiaries, the second person to die uses their NRB, another £285,000 and therefore between them they have "given away" £570,000 tax free. This is a perfectly legal way of dealing with your assets. That is not to say that the government are keeping a VERY close eye on this situation as they don't like losing out on the tax. To enable this scheme to work you each need to hold assets in your individual names, i.e property as Tenants in Common. I would be happy to answer any other queries on this matter. Please PM me. My fees for this type of thing are VERY reasonable compared to solicitors and other Will Writing companies as I am a totally independent Will Writer & Estate planner. Bear in mind paying the fees as apposed to upto £105,000 in tax is the cheaper option. Link to comment Share on other sites More sharing options...
Darbees Posted December 15, 2006 Share Posted December 15, 2006 This is a perfectly legal way of dealing with your assets. That is not to say that the government are keeping a VERY close eye on this situation as they don't like losing out on the tax. How could the government change it? They couldn't charge inheritance tax to the survivor as it would be possible they would have to sell up or be given money by a relative which would in turn attract tax. If that happened there would probably be a rush of old folk down to the divorce courts and they could divide their assets and live in sin and then their wills would be separate and presumably they would then both have the £285,000 allowance. I'm sure the psychopathic Gordon Brown will find a way round all this. Link to comment Share on other sites More sharing options...
Yellowrose Posted December 15, 2006 Author Share Posted December 15, 2006 You're going to have pay 40% of the difference between the threshold and the value of the house. Seems like a cheap way to get a house to me. A small mortgage would sort out the small amount of money you'd have to pay for an otherwise free house. Max, you are assuming everyone is in a similar position to you. I am older. I dont work due to ill health. I wouldnt get a mortgage. But I dont feel I want to I take one out if I could, my parents have paid for the house already and paid tax on their earning which bought it. Also my parents dont want the exchequer to get their hands on their money either. So they have agreed to see a solicitor, from the firm who made their first wills, in the new year. Phew!! Link to comment Share on other sites More sharing options...
Yellowrose Posted December 15, 2006 Author Share Posted December 15, 2006 Thank you everybody for your information. Its been very useful. Now a separate and related issue: Mother has got this bee in her bonnet about having to pay fees to go into a home. She thinks if she has to go into a home she will be forced to sell the house to do so. She has got this latest bit of info by chatting to her friends, and there may be some truth in it. Does the tenants in common procedure avoid the above? Link to comment Share on other sites More sharing options...
WTAW Posted December 19, 2006 Share Posted December 19, 2006 Hi Yellow Rose, yes by changing property ownership to tenants in common and including Discretionary Trusts in Wills (with I.O.U provision) your parents will be able to save on care home fees ONLY IF they use the property towards satisfying the NRB. Usually people who hover around the Inheritance tax bracket do so becuase their property is the main asset. By dealing with the IHT they will be killing 2 birds with one stone, beware though because it has been known for local authorities to slap a charge on properties (like lenders do when you take a mortgage out on a property) to make sure they get their money back once the property has been sold. Added: you don't have to sell a property to pay care home fees, if you have money obviously this can be used, if you have other income you could rent the property out and use the income towards paying care home fees. Do you live with your parents? If so and you have done (as your only home) for approx 5 years or more the local authority are not allowed to take the property into consideration. Link to comment Share on other sites More sharing options...
max Posted December 19, 2006 Share Posted December 19, 2006 Max, you are assuming everyone is in a similar position to you. I am older. I dont work due to ill health. I wouldnt get a mortgage. But I dont feel I want to I take one out if I could, my parents have paid for the house already and paid tax on their earning which bought it. Also my parents dont want the exchequer to get their hands on their money either. So they have agreed to see a solicitor, from the firm who made their first wills, in the new year. Phew!! You're still getting a house for next to nothing. If raising a mortgage is a problem then sell the house and buy a smaller one. I don't see the issue, it's your parents' house and when they die, not for a long time I hope, you'll get it for next to nothing. Most people do not have that luxury. Link to comment Share on other sites More sharing options...
muddycoffee Posted June 4, 2012 Share Posted June 4, 2012 Sorry to bring this thread up again but I have an inheritance question. One of my mates is set to inherit ten grand from a relative who died recently. Assuming he is given a cheque. As he already pays income tax from his full time job, does he have to declare the inheritance as income and pay income tax on it as well ? Link to comment Share on other sites More sharing options...
Cyclone Posted June 4, 2012 Share Posted June 4, 2012 http://www.hmrc.gov.uk/inheritancetax/tax-when-you-inherit.htm You realise that google would have been quicker than posting on here and then waiting for someone else to google the answer for you? The answer being, no, it does not count as income for tax declaration purposes. Link to comment Share on other sites More sharing options...
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