I am only a lowly financial adviser & not a tax expert but it's my view that its the Estate that pays any IHT due, not the individual who receives the gift. Also, if it is the Estate who pays & the deceased owned a residential property then the IHT threshold is now £500,000......and doubled to £1m if the deceased was a widow(er) who had previously inherited their spouses Estate.I would speak to the solicitors / executors who would be in a better position to help.
"People you give gifts to will be charged Inheritance Tax if you give away more than £325,000 in the 7 years before your death."
The above link also gives some good examples of how it works/order etc. The reason bob and I have mentioned £325k is any gifts (one assumes) would not be the residential property, again link above explains. Plus the Property amount only applies on estates up to certain values and who the property is left to. If estate is more than £2m or you are leaving to anyone other than children/grandchildren you don't get the extra allowance anyway.
Question please for any inheritance tax specialists: If IHT is payable on a gift given less than 3 years before the death of person gifting, does the 40% IHT have to be paid by the gift recipient or from the deceased’s estate?
I’m sure I heard someone say that the length of gift before the 7 years affects the amount of IHT paid . No idea of the numbers but say that gift was received 6 years and 51 weeks before the death of the person gifting you wouldn’t get hit with 40% .
Yes theirs a taper relief as below;
less than 3
40%
3 to 4
32%
4 to 5
24%
5 to 6
16%
6 to 7
8%
7 or more
0%
So, yes, this is a real scenario I currently face. Here’s the whole picture:
My 81 year old dad is very unwell at the moment, suffering in DV Hospital with cancer, covid and now pneumonia which, as you can imagine, has brought this and other considerations to the fore. Basically, he ‘gifted’ me £215k in 2019 which paid off my mortgage and gave me money to renovate my home. To give you the whole picture, he owns a home in his own name worth £350k and lives with his partner there albeit they are not married as she is married to someone else and no divorce proceedings exist for them to get married. He has 2 separate bank account balances of £170,000 (total £340k) held in joint names with him and me and him and his partner all of which he had solely funded, not us. He (wrongly) thinks that IHT wouldn’t apply to half of those balances because they are in joint names.
Its also worth saying that I am both, as his sole descendent, the major beneficiary in his will but also the executor of his will.
It did appear to me, from looking at the government guidance on line, that I (the beneficiary of the £215k gift) am, currently, personally liable for 40% of the £215k in the event that we lost dad, so that would be £86,000. Given that the whole of the £215k has been ‘spent’ on the renovation and mortgage repayment, being personally liable for £86,000 IHT would effectively mean that I would have to take out a mortgage to pay the IHT - ironically almost exactly the balance paid off using dad’s gift money.
Additionally, I have been considering how much IHT would be payable on dad’s existing assets which, as detailed above, total £690,000. With him leaving me, his descendant, the house, it seems that IHT payable on dad’s assets, would be £76,000. That makes a total IHT bill of £162,000.
Do those of you with more experience of IHT matters and/or ‘in the know’ agree with my assessment of things?
Any guidance or suggestions would be welcomed. I am pretty sure that you will tell me that there’s not much that can be done other than continue to pray that dad comes through his illnesses such that the IHT payable on the ‘gift’ reduces as the years go by.
I think it is a bit of a shame that you have done this this way, and I didn't even get the chance to discuss it.
As I mentioned a couple of times, i think this competition has been helpful to everyone beyond the competitive element, namely the element of discussing openly the issues which we think might affect the index. This would especially help those who come on here quite unsure about investing and looking to learn something. If they are getting into investing, especially with funds, such discussion can help shpae their views, rather than just piling into fund names we toss out there. You've taken that away and even made the forecasts themselves 'covert'.
And did enough people get a chance to express their view on the interval (3/4/6/12 months)?
I'm sorry, I don't like this at all. Apart from anything else I fear it perpetuates the perception among Lifers that this thread is full of well-off people being very smug and full of themselves.
I'm willing to be persuaded but right now I feel I'll give this a miss.
Sorry but I don’t see the problem Prague. Your guess in by the 7th after which RobLee will compile a spreadsheet and post it up with everyone’s guess. In July we go again. There is nothing to stop discussion and opinions and offering advice as normal. It may have be nice for Rob to consult you but I think you are making a mountain out of a molehill, in my opinion.
Ok maybe it was partly the hangover talking. I think the bit about @Rob7Lee sending me his score for transparency reasons really made me uncomfortable that anyone would think it necessary. Looked to me like it was, or had become, less a “bit of fun” than I had seen it.
Regarding the time frame, one of the options I wanted to throw in was that it would be fun to mesure ourselves against pro pundits, especially as a group. This would need a 12 month span, but that would then be too long before the fun starts. However it could be done if we placed our 12 month predictions alongside the 6 month ones, and then the 12 month ones become de facto the prediction for the 2nd half. I thought that this might encourage everyone to think longer term like we who are into it always advise newer punters to do. But if there’s no appetite for that, there we are.
Either way, I hope people will share their thoughts about what drives their forecast, even if they dont give their actual figure. That was what I appreciated about the first two.
Looks like I missed a 'frank exchange of views' yesterday!
My two pen'th.
I like the idea of setting the 12 month target now but then also have quarterly targets. That would keep the interest throughout the year and allows people to adjust and not lose interest if they are way off. The 'gold star' should definitely go to the 12 month winner!
I think it should be a 'secret ballot' but published immediately on close of entries (end of this coming week?), not because I have a cynical view of people on here, just because group think inevitably steers the herd and you'll get a more interesting spread of views if it's 'blind'.
Last, the above doesn't preclude anyone from putting forward their views and rationale, before or after. I'll certainly be putting my views forward, just as soon as I've worked out what they are!
For sure I was hoping to hear what you thought before we set up this time.
In your set up above, if I understand correctly, the 12 month forecast would remain separate and unchanged, regardless of how people do in the 3 month? Don't you think 3 months is a bit short?
I take the point about avoiding herd mentality with a secret ballot, (although the person you send them to (@Rob7Lee) will have a tough time disengaging from that, not sure I could) so long as people still share their overall thoughts, which I think is where the whole thing adds some value beyond the competition element.
Yes re the 12 month running alongside the quarterlies.
Bit late now but Rob could have gone first and sent his number to you - which I think is what he was originally suggesting - but it's not that important.
Quarterly would fit in with the earnings cycle but it's not a big deal - 6 months is fine.
I'm looking forward to the views as I definitely made the mistake of over-analysing and over-trading last year.
I am only a lowly financial adviser & not a tax expert but it's my view that its the Estate that pays any IHT due, not the individual who receives the gift. Also, if it is the Estate who pays & the deceased owned a residential property then the IHT threshold is now £500,000......and doubled to £1m if the deceased was a widow(er) who had previously inherited their spouses Estate.I would speak to the solicitors / executors who would be in a better position to help.
"People you give gifts to will be charged Inheritance Tax if you give away more than £325,000 in the 7 years before your death."
The above link also gives some good examples of how it works/order etc. The reason bob and I have mentioned £325k is any gifts (one assumes) would not be the residential property, again link above explains. Plus the Property amount only applies on estates up to certain values and who the property is left to. If estate is more than £2m or you are leaving to anyone other than children/grandchildren you don't get the extra allowance anyway.
Question please for any inheritance tax specialists: If IHT is payable on a gift given less than 3 years before the death of person gifting, does the 40% IHT have to be paid by the gift recipient or from the deceased’s estate?
I’m sure I heard someone say that the length of gift before the 7 years affects the amount of IHT paid . No idea of the numbers but say that gift was received 6 years and 51 weeks before the death of the person gifting you wouldn’t get hit with 40% .
Yes theirs a taper relief as below;
less than 3
40%
3 to 4
32%
4 to 5
24%
5 to 6
16%
6 to 7
8%
7 or more
0%
So, yes, this is a real scenario I currently face. Here’s the whole picture:
My 81 year old dad is very unwell at the moment, suffering in DV Hospital with cancer, covid and now pneumonia which, as you can imagine, has brought this and other considerations to the fore. Basically, he ‘gifted’ me £215k in 2019 which paid off my mortgage and gave me money to renovate my home. To give you the whole picture, he owns a home in his own name worth £350k and lives with his partner there albeit they are not married as she is married to someone else and no divorce proceedings exist for them to get married. He has 2 separate bank account balances of £170,000 (total £340k) held in joint names with him and me and him and his partner all of which he had solely funded, not us. He (wrongly) thinks that IHT wouldn’t apply to half of those balances because they are in joint names.
Its also worth saying that I am both, as his sole descendent, the major beneficiary in his will but also the executor of his will.
It did appear to me, from looking at the government guidance on line, that I (the beneficiary of the £215k gift) am, currently, personally liable for 40% of the £215k in the event that we lost dad, so that would be £86,000. Given that the whole of the £215k has been ‘spent’ on the renovation and mortgage repayment, being personally liable for £86,000 IHT would effectively mean that I would have to take out a mortgage to pay the IHT - ironically almost exactly the balance paid off using dad’s gift money.
Additionally, I have been considering how much IHT would be payable on dad’s existing assets which, as detailed above, total £690,000. With him leaving me, his descendant, the house, it seems that IHT payable on dad’s assets, would be £76,000. That makes a total IHT bill of £162,000.
Do those of you with more experience of IHT matters and/or ‘in the know’ agree with my assessment of things?
Any guidance or suggestions would be welcomed. I am pretty sure that you will tell me that there’s not much that can be done other than continue to pray that dad comes through his illnesses such that the IHT payable on the ‘gift’ reduces as the years go by.
Over to you!
My understanding is that you are pretty much spot on with your understanding.
Your dad has £690k of assets, with a £325k allowance, the amount in question is £365k.
40% of that is £146k.
Best of luck for your dad, having to worry about finances at such a difficult time is really tough.
So onto the 2021 challenge/competition. What will the FTSE 100 be on 30th June 2021?
To make it a little more covert, rather than post up on here, if everyone sends me a private message with their prediction I'll spreadsheet it and when all votes are in i'll post up. Shall we say closing date a week today, 7th Jan?
So it's not see as i'm cheating i'll message mine to this years winner Prague.
As a reminder we ended 2020 @ 6,460.52 - will it go up, will it go down.
I'll also post up monthly the table as it stands.....
That Ok with everyone?
Will do need a couple more of days to plot & make my prediction, still smarting from last loss - cheers in advance #Rob7Lee
First day of trading always seems to be an agenda-setting day, because many traders took time off over the Christmas-NY time. At least, that's how it used to be. Anyway another agenda setting day looms on Wednesday. The US elections are not in fact over. The result of the Georgia Senate run-offs is crucial to defining how much Biden will actually be able to get done. Of course you can also read 'analysts" offering polar opposite market outcomes for a given result, and of course anything less than a 60-40 Democrat win will see Trump and his trolls demanding a recount; but either way I'm assuming that where the indices end this week will be more significant than where they open today..
So onto the 2021 challenge/competition. What will the FTSE 100 be on 30th June 2021?
To make it a little more covert, rather than post up on here, if everyone sends me a private message with their prediction I'll spreadsheet it and when all votes are in i'll post up. Shall we say closing date a week today, 7th Jan?
So it's not see as i'm cheating i'll message mine to this years winner Prague.
As a reminder we ended 2020 @ 6,460.52 - will it go up, will it go down.
I'll also post up monthly the table as it stands.....
That Ok with everyone?
Will do need a couple more of days to plot & make my prediction, still smarting from last loss - cheers in advance #Rob7Lee
So onto the 2021 challenge/competition. What will the FTSE 100 be on 30th June 2021?
To make it a little more covert, rather than post up on here, if everyone sends me a private message with their prediction I'll spreadsheet it and when all votes are in i'll post up. Shall we say closing date a week today, 7th Jan?
So it's not see as i'm cheating i'll message mine to this years winner Prague.
As a reminder we ended 2020 @ 6,460.52 - will it go up, will it go down.
I'll also post up monthly the table as it stands.....
That Ok with everyone?
Will do need a couple more of days to plot & make my prediction, still smarting from last loss - cheers in advance #Rob7Lee
I am only a lowly financial adviser & not a tax expert but it's my view that its the Estate that pays any IHT due, not the individual who receives the gift. Also, if it is the Estate who pays & the deceased owned a residential property then the IHT threshold is now £500,000......and doubled to £1m if the deceased was a widow(er) who had previously inherited their spouses Estate.I would speak to the solicitors / executors who would be in a better position to help.
"People you give gifts to will be charged Inheritance Tax if you give away more than £325,000 in the 7 years before your death."
The above link also gives some good examples of how it works/order etc. The reason bob and I have mentioned £325k is any gifts (one assumes) would not be the residential property, again link above explains. Plus the Property amount only applies on estates up to certain values and who the property is left to. If estate is more than £2m or you are leaving to anyone other than children/grandchildren you don't get the extra allowance anyway.
Question please for any inheritance tax specialists: If IHT is payable on a gift given less than 3 years before the death of person gifting, does the 40% IHT have to be paid by the gift recipient or from the deceased’s estate?
I’m sure I heard someone say that the length of gift before the 7 years affects the amount of IHT paid . No idea of the numbers but say that gift was received 6 years and 51 weeks before the death of the person gifting you wouldn’t get hit with 40% .
Yes theirs a taper relief as below;
less than 3
40%
3 to 4
32%
4 to 5
24%
5 to 6
16%
6 to 7
8%
7 or more
0%
So, yes, this is a real scenario I currently face. Here’s the whole picture:
My 81 year old dad is very unwell at the moment, suffering in DV Hospital with cancer, covid and now pneumonia which, as you can imagine, has brought this and other considerations to the fore. Basically, he ‘gifted’ me £215k in 2019 which paid off my mortgage and gave me money to renovate my home. To give you the whole picture, he owns a home in his own name worth £350k and lives with his partner there albeit they are not married as she is married to someone else and no divorce proceedings exist for them to get married. He has 2 separate bank account balances of £170,000 (total £340k) held in joint names with him and me and him and his partner all of which he had solely funded, not us. He (wrongly) thinks that IHT wouldn’t apply to half of those balances because they are in joint names.
Its also worth saying that I am both, as his sole descendent, the major beneficiary in his will but also the executor of his will.
It did appear to me, from looking at the government guidance on line, that I (the beneficiary of the £215k gift) am, currently, personally liable for 40% of the £215k in the event that we lost dad, so that would be £86,000. Given that the whole of the £215k has been ‘spent’ on the renovation and mortgage repayment, being personally liable for £86,000 IHT would effectively mean that I would have to take out a mortgage to pay the IHT - ironically almost exactly the balance paid off using dad’s gift money.
Additionally, I have been considering how much IHT would be payable on dad’s existing assets which, as detailed above, total £690,000. With him leaving me, his descendant, the house, it seems that IHT payable on dad’s assets, would be £76,000. That makes a total IHT bill of £162,000.
Do those of you with more experience of IHT matters and/or ‘in the know’ agree with my assessment of things?
Any guidance or suggestions would be welcomed. I am pretty sure that you will tell me that there’s not much that can be done other than continue to pray that dad comes through his illnesses such that the IHT payable on the ‘gift’ reduces as the years go by.
Over to you!
Apology, I missed this this morning, and firstly sorry to hear how unwell your dad is, fingers crossed he pulls through.
Yes you are correct in the main; the IHT limit is £325k however as he is leaving his home to you that will increase to £500k as you have indicated. HOWEVER, I think you may be wrong on Taper relief, Taper relief only applies when the gift/s exceed the £325k. Many people have been caught out on that.
As I read it;
1. You will personally owe 40% of the £215k i.e. £86,000. 2. The estate of £690k (£340k cash and £350k property) would incur an IHT charge of £190k x 40% i.e. £76,000.
In essence the entire estate is £905,000 and 40% tax is payable on £405,000 of that, split between you and the estate. What happened to your mum/his wife, did she pass and leave everything to your dad (if so when is important) or did they just spit up?
All that said, what has your dad left to whom (other than the house), as it may be possible I guess you will be inheriting enough cash to cover your £86k bill? But be aware you may have to pay the £86k before the other funds are released so may need a bridging loan in that instance.
Unfortunately I don't think there is much you can do, if he hasn't this year and last he can give away £3k for each of those two years to any individual and another £250 to any number of people (not the £3k recipient), but it's going to make very little difference to the overall.
This estate is one that the HMRC are prime to look into in greater detail, so make sure your paperwork is above board with the joint accounts and any spending that's happened. And as above, I feel you are wrong on Taper relief, it'll never apply unless he gifts more money to take the total gifts over £325k.
EDIT; I would check that your £215k isn't deemed as simply using up part of the allowance, it may do and only if it goes over £325k will it be payable by you.
Out of interest any thought on what will happen to his partner should your father pass away ? Will you turf her out or will you let her stay in the property ? Does she have any rights to stay there (like an interest in possession) ??
Just checked with my accountant. His view is that gifts prior to death are dealt with first, in that they use up the tax free amount first, therefore you would not have to pay any tax on the gift and the estate would have £285k tax free as the remaining amount of the limit. You would only become personally liable if the gift exceeded £325k and then you would have to pay tax on the amount above £325k. Phew!
Just checked with my accountant. His view is that gifts prior to death are dealt with first, in that they use up the tax free amount first, therefore you would not have to pay any tax on the gift and the estate would have £285k tax free as the remaining amount of the limit. You would only become personally liable if the gift exceeded £325k and then you would have to pay tax on the amount above £325k. Phew!
Thats great news for @meldrew66. It might be even better if his father can use a spouse's IHT NRB as well. Important to know about his mother as you said earlier.
Just checked with my accountant. His view is that gifts prior to death are dealt with first, in that they use up the tax free amount first, therefore you would not have to pay any tax on the gift and the estate would have £285k tax free as the remaining amount of the limit. You would only become personally liable if the gift exceeded £325k and then you would have to pay tax on the amount above £325k. Phew!
Thats great news for @meldrew66. It might be even better if his father can use a spouse's IHT NRB as well. Important to know about his mother as you said earlier.
yes and no, sorry I typed quickly as in a meeting.
Although it's good news from a personal IHT liability, it is bad news in that the taper relief @meldrew66 thinks he will potentially benefit he will never do so all the time the gift is below £325k. It will only ever use up part of the tax free allowance and never get any taper relief i'm afraid.........
Just checked with my accountant. His view is that gifts prior to death are dealt with first, in that they use up the tax free amount first, therefore you would not have to pay any tax on the gift and the estate would have £285k tax free as the remaining amount of the limit. You would only become personally liable if the gift exceeded £325k and then you would have to pay tax on the amount above £325k. Phew!
Thats great news for @meldrew66. It might be even better if his father can use a spouse's IHT NRB as well. Important to know about his mother as you said earlier.
yes and no, sorry I typed quickly as in a meeting.
Although it's good news from a personal IHT liability, it is bad news in that the taper relief @meldrew66 thinks he will potentially benefit he will never do so all the time the gift is below £325k. It will only ever use up part of the tax free allowance and never get any taper relief i'm afraid.........
Thanks Rob and Golfie. Really useful comments and clarification. Not sure I fully understand what you mean about not getting taper relief on the £215k gift monies.
To answer your question, mum and dad divorced 50 years ago so dad's assets really are his own. Dad's will leaves me everything apart from small cash gifts to some of his mates. His home is the tricky issue whereby he is leaving it tome on his will but with a clause that his current partner can live there for the rest of her life. She is only 58 so is highly likely to outlive me.
Christ knows what the practical and financial implications are from that scenario! Sounds like I become a landlord of a rent free tenant.
One other question: can I, as executor of the will, use the £170k in dad's joint account with his partner to pay the £162k potential IHT bill when the time comes? As you can imagine, I'd rather use 'her' balance rather than 'mine'. What do you think?
Sounds like my scenario is on the complicated scale somewhat and will be tricky to manage without legal advice.
Just checked with my accountant. His view is that gifts prior to death are dealt with first, in that they use up the tax free amount first, therefore you would not have to pay any tax on the gift and the estate would have £285k tax free as the remaining amount of the limit. You would only become personally liable if the gift exceeded £325k and then you would have to pay tax on the amount above £325k. Phew!
Thats great news for @meldrew66. It might be even better if his father can use a spouse's IHT NRB as well. Important to know about his mother as you said earlier.
yes and no, sorry I typed quickly as in a meeting.
Although it's good news from a personal IHT liability, it is bad news in that the taper relief @meldrew66 thinks he will potentially benefit he will never do so all the time the gift is below £325k. It will only ever use up part of the tax free allowance and never get any taper relief i'm afraid.........
Thanks Rob and Golfie. Really useful comments and clarification. Not sure I fully understand what you mean about not getting taper relief on the £215k gift monies.
To answer your question, mum and dad divorced 50 years ago so dad's assets really are his own. Dad's will leaves me everything apart from small cash gifts to some of his mates. His home is the tricky issue whereby he is leaving it tome on his will but with a clause that his current partner can live there for the rest of her life. She is only 58 so is highly likely to outlive me.
Christ knows what the practical and financial implications are from that scenario! Sounds like I become a landlord of a rent free tenant.
One other question: can I, as executor of the will, use the £170k in dad's joint account with his partner to pay the £162k potential IHT bill when the time comes? As you can imagine, I'd rather use 'her' balance rather than 'mine'. What do you think?
Sounds like my scenario is on the complicated scale somewhat and will be tricky to manage without legal advice.
If the money is in a joint account then technically they own it 50/50......I have heard stories of the surviving account holder having access to it all & other stories that on death the account is "frozen" to allow for probate. I would seriously advise you to get advice on this from a solicitor, although in the first instance it may be a good idea for your father to open an account on his sole name & to transfer the money over to that......assuming it is all his & he was just using his partner's name for tax reasons & to use up the full £85k "protection" allowance - which in this case could seriously backfire on him if she were to claim that half of it WAS hers.
Just checked with my accountant. His view is that gifts prior to death are dealt with first, in that they use up the tax free amount first, therefore you would not have to pay any tax on the gift and the estate would have £285k tax free as the remaining amount of the limit. You would only become personally liable if the gift exceeded £325k and then you would have to pay tax on the amount above £325k. Phew!
Thats great news for @meldrew66. It might be even better if his father can use a spouse's IHT NRB as well. Important to know about his mother as you said earlier.
yes and no, sorry I typed quickly as in a meeting.
Although it's good news from a personal IHT liability, it is bad news in that the taper relief @meldrew66 thinks he will potentially benefit he will never do so all the time the gift is below £325k. It will only ever use up part of the tax free allowance and never get any taper relief i'm afraid.........
Thanks Rob and Golfie. Really useful comments and clarification. Not sure I fully understand what you mean about not getting taper relief on the £215k gift monies.
To answer your question, mum and dad divorced 50 years ago so dad's assets really are his own. Dad's will leaves me everything apart from small cash gifts to some of his mates. His home is the tricky issue whereby he is leaving it tome on his will but with a clause that his current partner can live there for the rest of her life. She is only 58 so is highly likely to outlive me.
Christ knows what the practical and financial implications are from that scenario! Sounds like I become a landlord of a rent free tenant.
One other question: can I, as executor of the will, use the £170k in dad's joint account with his partner to pay the £162k potential IHT bill when the time comes? As you can imagine, I'd rather use 'her' balance rather than 'mine'. What do you think?
Sounds like my scenario is on the complicated scale somewhat and will be tricky to manage without legal advice.
Point 1;
Taper relief;
Your dad gifted you £215k. Upon death (sorry to sound so callous) any gifts prior are 'first in line' therefore your £215k will simply only ever use up part of the £325k tax free allowance, you'll never get taper relief, only upon 7 years and 1 day post gift will it no longer form part of the estate or if subsequent gifts are given that takes the total gifts over the £325k potentially some of that will then get Taper relief.
As an example had your father gifted you £425k then yes, £325k would use up the allowance and the further £100k above that could benefit from taper relief in years 3-7.
Point 2;
The House
This is where sometimes the best laid plans potentially become the worst. I understand why your father has effectively left you the house but his partner has the right to live their rent free etc, but is there a proper agreement drawn up? Who is responsible for maintenance, insurance etc?
Point 3;
Paying IHT
The estate will need to pay the IHT, be warned though sometimes HMRC have been known to ask for a deposit before they will release any funds. I had to lend my mum (and her siblings) a lot of money (6 figure) just so they could release my Grandads estate.
Point 4;
The Cash Accounts
Under UK Law joint accounts, are generally held by the joint account holders as ‘joint tenants’, so that on the death of one account holder the funds in the account pass to the surviving account holder by the principle of survivorship.
This happens automatically, regardless of the terms of the deceased person’s will or the rules of intestacy and there is usually no need to obtain a grant of probate in order to transfer the funds. The surviving account holder can simply provide the bank or building society with the deceased joint account holder’s death certificate and the account will be transferred into the survivor’s name.
All that said, this estate would need probate and HMRC do a lot more digging as to who is the real owner, but ultimately they are simply interested in getting the due tax, not who's pocketed the cash and disappeared. Worst case scenario, she takes the death certificate to the bank, pockets the £170k and disappears into the night, the estate is then potentially left with a tax bill on it when you go through probate.
Point 5;
See a solicitor now.
Unfortunately I think your father has either received bad advice or misunderstood the situation or theres stuff you haven't seen/don't know. I don't know how well he gets on with his Partner, but money can do funny things to people. As a matter of urgency If he's not intending to leave £170k to her, then he needs to remove her name from the account where it is held (I assume you don't have power of attorney right now so that may prove difficult?) and put back into his sole name to make sure that doesn't happen. Unless it's an account requiring both signatures she could withdraw the money tomorrow.
Additionally an agreement needs to be drawn up as to responsibilities on the house until his partner passes. My aunt has a house from her late husband that he left to his children but she has the right to live there for life. There's about a 15 page agreement on it, that might be over kill but it needs a formal agreement for both of your protections, for instance with my aunt, she can sell the house under certain circumstances (i.e. she needs a single storey property) but costs are hers to do so, she is also responsible for maintaining the house. If you think your fathers partner may outlive you, you need to cater for that as well so as to not burden your children or beneficiaries.... (probably need to do that anyway, no one knows what tomorrow brings).
Sorry if we've given you more trouble that you initial question started with, but best to be in full knowledge, but I really would see a solicitor as soon as you can to go through all this properly.
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When I set my profile up I wasn't in the pub but wished I was. Plus ca change.
My 81 year old dad is very unwell at the moment, suffering in DV Hospital with cancer, covid and now pneumonia which, as you can imagine, has brought this and other considerations to the fore. Basically, he ‘gifted’ me £215k in 2019 which paid off my mortgage and gave me money to renovate my home. To give you the whole picture, he owns a home in his own name worth £350k and lives with his partner there albeit they are not married as she is married to someone else and no divorce proceedings exist for them to get married. He has 2 separate bank account balances of £170,000 (total £340k) held in joint names with him and me and him and his partner all of which he had solely funded, not us. He (wrongly) thinks that IHT wouldn’t apply to half of those balances because they are in joint names.
Its also worth saying that I am both, as his sole descendent, the major beneficiary in his will but also the executor of his will.
It did appear to me, from looking at the government guidance on line, that I (the beneficiary of the £215k gift) am, currently, personally liable for 40% of the £215k in the event that we lost dad, so that would be £86,000. Given that the whole of the £215k has been ‘spent’ on the renovation and mortgage repayment, being personally liable for £86,000 IHT would effectively mean that I would have to take out a mortgage to pay the IHT - ironically almost exactly the balance paid off using dad’s gift money.
Additionally, I have been considering how much IHT would be payable on dad’s existing assets which, as detailed above, total £690,000. With him leaving me, his descendant, the house, it seems that IHT payable on dad’s assets, would be £76,000. That makes a total IHT bill of £162,000.
Over to you!
Bit late now but Rob could have gone first and sent his number to you - which I think is what he was originally suggesting - but it's not that important.
Quarterly would fit in with the earnings cycle but it's not a big deal - 6 months is fine.
I'm looking forward to the views as I definitely made the mistake of over-analysing and over-trading last year.
Your dad has £690k of assets, with a £325k allowance, the amount in question is £365k.
40% of that is £146k.
Best of luck for your dad, having to worry about finances at such a difficult time is really tough.
Yes you are correct in the main; the IHT limit is £325k however as he is leaving his home to you that will increase to £500k as you have indicated. HOWEVER, I think you may be wrong on Taper relief, Taper relief only applies when the gift/s exceed the £325k. Many people have been caught out on that.
As I read it;
1. You will personally owe 40% of the £215k i.e. £86,000.
2. The estate of £690k (£340k cash and £350k property) would incur an IHT charge of £190k x 40% i.e. £76,000.
In essence the entire estate is £905,000 and 40% tax is payable on £405,000 of that, split between you and the estate. What happened to your mum/his wife, did she pass and leave everything to your dad (if so when is important) or did they just spit up?
All that said, what has your dad left to whom (other than the house), as it may be possible I guess you will be inheriting enough cash to cover your £86k bill? But be aware you may have to pay the £86k before the other funds are released so may need a bridging loan in that instance.
Unfortunately I don't think there is much you can do, if he hasn't this year and last he can give away £3k for each of those two years to any individual and another £250 to any number of people (not the £3k recipient), but it's going to make very little difference to the overall.
This estate is one that the HMRC are prime to look into in greater detail, so make sure your paperwork is above board with the joint accounts and any spending that's happened. And as above, I feel you are wrong on Taper relief, it'll never apply unless he gifts more money to take the total gifts over £325k.
EDIT; I would check that your £215k isn't deemed as simply using up part of the allowance, it may do and only if it goes over £325k will it be payable by you.
Just checked with my accountant. His view is that gifts prior to death are dealt with first, in that they use up the tax free amount first, therefore you would not have to pay any tax on the gift and the estate would have £285k tax free as the remaining amount of the limit. You would only become personally liable if the gift exceeded £325k and then you would have to pay tax on the amount above £325k. Phew!
There may well be a bounce but difficult to see this as anything other than directional for US markets ....
Although it's good news from a personal IHT liability, it is bad news in that the taper relief @meldrew66 thinks he will potentially benefit he will never do so all the time the gift is below £325k. It will only ever use up part of the tax free allowance and never get any taper relief i'm afraid.........
To answer your question, mum and dad divorced 50 years ago so dad's assets really are his own. Dad's will leaves me everything apart from small cash gifts to some of his mates. His home is the tricky issue whereby he is leaving it tome on his will but with a clause that his current partner can live there for the rest of her life. She is only 58 so is highly likely to outlive me.
Christ knows what the practical and financial implications are from that scenario! Sounds like I become a landlord of a rent free tenant.
One other question: can I, as executor of the will, use the £170k in dad's joint account with his partner to pay the £162k potential IHT bill when the time comes? As you can imagine, I'd rather use 'her' balance rather than 'mine'. What do you think?
Sounds like my scenario is on the complicated scale somewhat and will be tricky to manage without legal advice.
Taper relief;
Your dad gifted you £215k. Upon death (sorry to sound so callous) any gifts prior are 'first in line' therefore your £215k will simply only ever use up part of the £325k tax free allowance, you'll never get taper relief, only upon 7 years and 1 day post gift will it no longer form part of the estate or if subsequent gifts are given that takes the total gifts over the £325k potentially some of that will then get Taper relief.
As an example had your father gifted you £425k then yes, £325k would use up the allowance and the further £100k above that could benefit from taper relief in years 3-7.
Point 2;
The House
This is where sometimes the best laid plans potentially become the worst. I understand why your father has effectively left you the house but his partner has the right to live their rent free etc, but is there a proper agreement drawn up? Who is responsible for maintenance, insurance etc?
Point 3;
Paying IHT
The estate will need to pay the IHT, be warned though sometimes HMRC have been known to ask for a deposit before they will release any funds. I had to lend my mum (and her siblings) a lot of money (6 figure) just so they could release my Grandads estate.
Point 4;
The Cash Accounts
Under UK Law joint accounts, are generally held by the joint account holders as ‘joint tenants’, so that on the death of one account holder the funds in the account pass to the surviving account holder by the principle of survivorship.
This happens automatically, regardless of the terms of the deceased person’s will or the rules of intestacy and there is usually no need to obtain a grant of probate in order to transfer the funds. The surviving account holder can simply provide the bank or building society with the deceased joint account holder’s death certificate and the account will be transferred into the survivor’s name.
All that said, this estate would need probate and HMRC do a lot more digging as to who is the real owner, but ultimately they are simply interested in getting the due tax, not who's pocketed the cash and disappeared. Worst case scenario, she takes the death certificate to the bank, pockets the £170k and disappears into the night, the estate is then potentially left with a tax bill on it when you go through probate.
Point 5;
See a solicitor now.
Unfortunately I think your father has either received bad advice or misunderstood the situation or theres stuff you haven't seen/don't know. I don't know how well he gets on with his Partner, but money can do funny things to people. As a matter of urgency If he's not intending to leave £170k to her, then he needs to remove her name from the account where it is held (I assume you don't have power of attorney right now so that may prove difficult?) and put back into his sole name to make sure that doesn't happen. Unless it's an account requiring both signatures she could withdraw the money tomorrow.
Additionally an agreement needs to be drawn up as to responsibilities on the house until his partner passes. My aunt has a house from her late husband that he left to his children but she has the right to live there for life. There's about a 15 page agreement on it, that might be over kill but it needs a formal agreement for both of your protections, for instance with my aunt, she can sell the house under certain circumstances (i.e. she needs a single storey property) but costs are hers to do so, she is also responsible for maintaining the house. If you think your fathers partner may outlive you, you need to cater for that as well so as to not burden your children or beneficiaries.... (probably need to do that anyway, no one knows what tomorrow brings).
Sorry if we've given you more trouble that you initial question started with, but best to be in full knowledge, but I really would see a solicitor as soon as you can to go through all this properly.
Still well down on what it was three months ago. And US markets crashing? I don't call 1.5% a crash. Totally steady after that initial drop.