Making a will and putting things in trust

[stonerblue]

I suppose it depends on a number of things, can you make the assets generate more assets,how old you are, how old the kids are, how sensible the kids are and the great unknown, how long are you going to live

I gave daughter 15 k ten years ago and she used it for mortgage deposit. probably generated more 'profit' than if it was stuck in my bank for 30 years.

 

[ChicagoBlue]

We told our kids they’re not getting an inheritance unless our returns are very rosy or we die early! Rather, we have funded their Tax-Free IRAs since they first earned a penny.

A Roth IRA is about $7,000/yr and has to relate to earned income (so they have to have earned more than that for the full amount), although it doesn’t have to be THEIR earned income that funds it.

This is a way for us to use compounding to build their inheritance long after we are gone!

For instance, if, say from age 15 to age 45 (30 years, when I will be about 80), I invest that money for them, and then they let it ride until they reach retirement age (68 for them, or 23 more years with no additional monies added), I will have invested ($7K x 30 = $210,000) for them, but at age 68…

If they get 10% on their money…

$11,341,555 TAX FREE

If they get 8% on their money…

$5,028,445 TAX FREE

If they only get 6% on their money…

$2,248,350 TAX FREE

They are currently both in their mid/late 20s with about $200,000 in their accounts, which is tax free, and are thus on track for the higher amount given their returns to date. It can also be used anytime for a first home purchase without any pre-retirement penalty.

 

[halfmist]

I gave daughter 15 k ten years ago and she used it for mortgage deposit. probably generated more 'profit' than if it was stuck in my bank for 30 years.

If you didn’t attach strings to your gift then you obviously have got a very sensible daughter. The people with the most to fear under Inheritance Tax are the wealthy whose wealth is tied up in family businesses. There is an old Chinese proverb that tends to hold true when passing down wealth in these cases. The grandfather builds the empire up, the son squanders it and the grandson loses it. It often explains why they hold on to their wealth or stick it into a Trust with conditions.

 

[Gareth Barry Conlon]

If you didn’t attach strings to your gift then you obviously have got a very sensible daughter. The people with the most to fear under Inheritance Tax are the wealthy whose wealth is tied up in family businesses. There is an old Chinese proverb that tends to hold true when passing down wealth in these cases. The grandfather builds the empire up, the son squanders it and the grandson loses it. It often explains why they hold on to their wealth or stick it into a Trust with conditions.

I've worked with various old money families and the reality is that most generations in modern times have seen the asset pile dwindle slightly. The cost associated with a high end lifestyle is massive and the easy win business opportunities that were once easy to find are now much higher risk.

There is a tipping point now where if you are wealthy on a global scale you can live a tax-free life living off the interest on your Billions.

The common UK millionaire probably spends more maintaining houses and cars than they earn after tax.

 

[denislawsbackheel]

With tenants in common does that impact the combined value of the estate that you can leave without paying IHT, which I understand is £1m if leaving to children and have combined the allowances ?

We are already giving a regular amount away, have been since my lad was 18 to minimise IHT when we eventually peg it (only 52 so a while to go hopefully), under the normal expenditure out of income rules (and yes we are keeping detailed records).

Expenditure out of income IHT exemption is a terrific wheeze most people are not aware of.
Well done.

 

[halfmist]

I've worked with various old money families and the reality is that most generations in modern times have seen the asset pile dwindle slightly. The cost associated with a high end lifestyle is massive and the easy win business opportunities that were once easy to find are now much higher risk.

There is a tipping point now where if you are wealthy on a global scale you can live a tax-free life living off the interest on your Billions.

The common UK millionaire probably spends more maintaining houses and cars than they earn after tax.

So true. A sign that enough is enough in life is when you have everything you want and anything else you spend, is just an upgrade on what you already have

 

[Kirkstall Blue]

I gave daughter 15 k ten years ago and she used it for mortgage deposit. probably generated more 'profit' than if it was stuck in my bank for 30 years.

We have done the same for our three helping them out has proved a wise decision, now it’s the turn of the grandchildren.
The government has so many rules about what we can or cannot do with the money we earn, and the assets left over, “once upon a time” none of these rules existed except IHT
It feels like I should have led a lazy life then the care home would be free.

 

[halfmist]

We have done the same for our three helping them out has proved a wise decision, now it’s the turn of the grandchildren.
The government has so many rules about what we can or cannot do with the money we earn, and the assets left over, “once upon a time” none of these rules existed except IHT
It feels like I should have led a lazy life then the care home would be free.

And that is the bug bear. Both my mum and aunty worked well in to their retirement, both owned their own properties. They had to pay the full cost of their care home fees with no special privileges over those who never worked and lived in State funded accommodation all their lives with the Council, or the tax payer picking up the cost no matter how long they have lived here . There is no incentive not to work the system.

 

[denislawsbackheel]

We have done the same for our three helping them out has proved a wise decision, now it’s the turn of the grandchildren.
The government has so many rules about what we can or cannot do with the money we earn, and the assets left over, “once upon a time” none of these rules existed except IHT
It feels like I should have led a lazy life then the care home would be free.

Only a shitty one.

 

[denislawsbackheel]

And that is the bug bear. Both my mum and aunty worked well in to their retirement, both owned their own properties. They had to pay the full cost of their care home fees with no special privileges over those who never worked and lived in State funded accommodation all their lives with the Council, or the tax payer picking up the cost no matter how long they have lived here . There is no incentive not to work the system.

Have you compared state funded care homes and paid ones?
I have.
I'm saving up.

 

[SiMCFC]

If anyone know anyone with a dry barn and likes cars, pick up a couple of mk2 escorts and park them for 20 years (obviously giving them a good run around a couple of times a month). I know a bloke who's just had the above given to him on his Father's passing, him and his Brother didn't know anything about it, they were bought long ago and no bugger had a clue.

His Old Fella died with virtually zero in the bank save for the 5k he had left in an old coffee jar for his funeral. One of the happiest Guys I've ever met as well but never fell into the rat race of life, just did lots of nice holidays every year after getting divorced 30 years ago and spent the lot, the Sons will get half each of a nice house and a decent chunk of cash if they cash in the cars I guess.

 

[Bournemouth Blue]

We took advice a couple of years ago, made wills that seemed nailed-on common sense, and the along came Rachel

 

[halfmist]

Have you compared state funded care homes and paid ones?
I have.
I'm saving up.

You will find most are a mixture of both types, particularly where top up fees are allowed

 

[denislawsbackheel]

So true. A sign that enough is enough in life is when you have everything you want and anything else you spend, is just an upgrade on what you already have

Not all
Most importantly.

 

[ganganvince]

My solicitor told us to set up a trust to stop a situation where one of us dies, remarries, and some portion of our estate winding up with whoever that person is rather than my kiddiewinks. Is this not right? There was a cost to it but not horrific.

If using a discretionary trust choose trustees wisely.

 

[Kirkstall Blue]

And that is the bug bear. Both my mum and aunty worked well in to their retirement, both owned their own properties. They had to pay the full cost of their care home fees with no special privileges over those who never worked and lived in State funded accommodation all their lives with the Council, or the tax payer picking up the cost no matter how long they have lived here . There is no incentive not to work the system.

Most streetwise people have always known how to work the system and if you both go in a care home they can take the cost out of your assets. HM treasury should be rolling in cash.

 

[southamptonblue]

You can give away as much as you like, an unlimited amount. As long as you live 7 years there will be no IHT to pay.
TVs Anne Robinson did that. Gave the lot to her kids to avoid IHT. £50 million!

...what they stopped I believe, is signing your house over whilst alive? It used to be 5 or 7 years, then it became your kids house and no inheritance tax on death, and no 'care costs'....but now, they will say you did it to avoid the inheritance tax and or care costs, no matter the time frame, and will claim it?
Reference the will....."if it says free...it isn't", get a will done through a Solicitor, think you need to for putting things 'in trust' anyway?

 

[halfmist]

...what they stopped I believe, is signing your house over whilst alive? It used to be 5 or 7 years, then it became your kids house and no inheritance tax on death, and no 'care costs'....but now, they will say you did it to avoid the inheritance tax and or care costs, no matter the time frame, and will claim it?
Reference the will....."if it says free...it isn't", get a will done through a Solicitor, think you need to for putting things 'in trust' anyway?

There are two sets of rules operating here,depending on whether you are the tax man or the local Authority..
As regards the taxman it is quite legitimate to sign over the house to avoid inheritance tax. However when it is what you call, a gift with reservation, i.e. the person making the gift is allowed to continue living in it as previous, then the person receiving the house as a gift or below market value is assessed by the tax man each year on rental market value.
This can only be avoided if the giver agrees to the house being bought back in to their estate up to the time of their death for IHT or they move out.
They must sign a form and lodge it with HMIT.
The 7 year clock will only start ticking when they move out.
As regards the Local Authority of course they will see if such a form has been signed with HMRC and if it has, then it is an open and shut case.
But they will also consider the length of time from the property being signed over to it being vacated by person making the gift
Each case will be decided on its merits but it may well end up in a battle asking the Local Authority to pick up the care fees.

 

[denislawsbackheel]

They do not need to move out to avoid IHT.
They can pay the market rent to the owners, who will need to declare it to HMRC and remain.
Of course the longer you do it from needing care the less likely the local authority will deem it deprivation of assets for care costs.
Try it within a couple of years and they’ll get you.

 

[denislawsbackheel]

...what they stopped I believe, is signing your house over whilst alive? It used to be 5 or 7 years, then it became your kids house and no inheritance tax on death, and no 'care costs'....but now, they will say you did it to avoid the inheritance tax and or care costs, no matter the time frame, and will claim it?
Reference the will....."if it says free...it isn't", get a will done through a Solicitor, think you need to for putting things 'in trust' anyway?

Very confused!
Mixing up IHT rules and care rules.