AIBU to not want anything to do with PILs 'Inheritance Planning' ?(125 Posts)
I've namechanged as this is quite a personal issue.
PILs are (very amicably) divorced and, through shrewd house purchases, hard work and their own inheritances have decent-sized estates (about 4-5m between them I guess).
Recently they have approached DH several times to discuss 'inheritance planning'. He has no interest in the actual money and doesn't care for tax dodges so has suggested that they speak to a professional who can help them to decide what to do. Actually, I think that he is terrified of the idea of his parents dying, but that's not the reason he gave them. While I respect DH's wish not to discuss the issue, this has led to PILs now coming to me to ask if I can 'encourage' DH to engage or become involved myself. I don't feel comfortable talking to them about their money either so have taken to changing the subject or found reasons to avoid any lunches clearly planned to discuss the topic (this tactic is not long-term, I know). I know that they read our lack of interest as being unsupportive of them and irresponsible (towards them and our children, who I suppose would gain the most out of their planning). To them, I think that leaving a 'good' inheritance is important, especially as their parents did this. While I am happy to support them in other ways, I feel very uncomfortable talking about this (basically, discussing how we could gain the most out of their deaths) and know them to be more than capable of making the 'right' choices without our involvement. My own family is not especially well off and Quaker, all this feels a bit alien to me.
AI (and my husband) BU?
We will need to pay for our care, but there are many people who have not had many of the chances we have had , and they will need funded care. I am paid by the taxpayer , I was educated by the tax payer , I have given birth four times in NHS hospitals , my children are all educated by the tax payer . As a student I had loans and grants from the tax payer .
Patpig, I don't need to send a gift to the taxman . I am content that as a family we pay our share as we should .
Married we will hopefully be paying for five children to go to university , so I understand that feeling. In fact I hope we have further children so we may pay for more, if they choose to go to university. But I am happy to pay so that clever students who do not have the advantages and luck that my children have , can also go .
ok so if there is 4-5 million and taxman gets full 40% without any tax planning
that still leaves 2-3 million to inherit so you need to engage about that, about the objects d'art ages of transfer of money to your DC and possibly DH's brothers DC do they get it all at 18, 21, 25 or interest only from 18 and capital at 25 etrc, also what about power of attorney for welfare even if you would prefer accountant had attorney powers financially etc fund to pay for DC at university wetc, no-one is suggesting you engage inb anything illegal or even borderline
do you think ISA's and pensions are dodgy? the governement allow us not to pay tax on these legally
In our case we were asked if we would like property signed over to ourselves and money transferred so that we could escape inheritance tax. We thought that was wrong.
We have savings , but have never been motivated by a desire to hide money from the taxman . We would also not sign property over to our children so we could avoid paying for our care.
Again we have pensions but with the purpose of providing for old age, not for hiding money from the taxman .
Message withdrawn at poster's request.
I'm really shocked at the number of people who seem to think it is "honourable" to try to reduce inheritance tax. Tax has to come from somewhere and the advantage of taxing inheritance is that no-one has any right to it, no-one should expect it and no-one can rely on it.
Granny may suddenly decide to leave the money to the cats home, spend it on care or just not die at the time when the gas bill is due.
All this "it's taxing the dead" is just emotive.
I would far rather pay more inheritance tax when (and if) my parents leave me money and pay less income tax / VAT / have more midwives at the hospital when I give birth.
Anyway - back to the Op. Agree it is hard to talk about and even more so with in-laws. Dh and I have agreed that we each talk to our own parents about the issues and not to each others. However, if your dh can face the conversation then it is worth it. I find it best to think about the maths and law of the situation - and not to dwell on why it would actually happen.
It sounds like DH is not at all close to his parents.
It does seem a little odd to effectively refuse to discuss the matter and indeed avoid even the possibility of the matter being raised.
I would be perplexed in their position; but perhaps there's a history.
YABU not to be as supportive as possible of what they decide to do with inheritance planning. It goes far beyond tax planning and will include everything down to who gets that vase and who keeps that painting.
The amount of time, effort, expense and grief both my parents and my PILs have gone through as their parents have died is just unbelievable.
The only one which was dealt with sensibly was my paternal GM - she called a family meeting with her solicitor and 5 kids, set out her living will/end of life plan, medical power of attorney, provision for care, annual gifts and bequests that would be happening until her estate was exhausted or she died, a full schedule of all her personal effects, who would be a signatory with her on her bank account, passwords for online stuff, all sorts. She and the solicitor docketed up all the necessary personal papers and he kept them in his safe with her will etc. This was when she was in her 60s and in full health. Thank goodness as a few years later she got Parkinsons and went downhill quite quickly.
My dad said it was upsetting at the time but it kept the family together afterwards, unlike other deaths of my grandparents which have been steadily more divisive and acrimonious between their kids as a result of lack of planning and a squeamishness about discussing death and finances within the family. It took 3 years for probate to be granted for DH's grandmother because she didn't trust her kids and refused to discuss anything with them in advance so nothing could be found, everything was hidden away here and there - 10 shares in BT, 15 shares in British Gas etc. No tax to pay in the end but huge administrative burdens and headaches.
Every year now my DF and I have a little "summit" when we're on holiday together, where we go through again what he and my mother are planning and I know who to contact and what to do if the worst happens. DBro and I are already fully aware of what happens to their property and finances and whose responsibility it is to do various things. They're only in their mid-50s.
if money is left to charity there is a certain amount of tax relief so even that reduces tax bill
regarding signing over property there are rules for instance if they sign their house to your DH and keep living in it, they either have to pay full market rent to your DH or it is considered not truly a gift( gift with benefits) and at least in part liable for tax, you really really need to meet with them to discuss this, and if you do not want that you need to say so to not talk is really unfair as you acknowledged earlier, your PIL are being really sensible and thoughtful trying to provide etc don't throw it back in their faces by refusing to engage, it does not mean you need to agree, certainly signing over a second or third home would be considered reasonable, most Quakers would consider it moral to provide for your family
there is no way they are ever going to need 4-5 million for care homes so they will not be depriving themselves; even in a luxury home it is unlikely the care would be much more than 2-400,000 ( allowing for about 4 years at about 1-2000 per week that is above average) although average time in full nursing care is about 2 years, discussing it now will save lots of pain later,
leaving money in trust for GC is not tax avoidance it is still taxed it just makes sure they do not have full access until old enough the default would be all of the capital at 18 which i think is too young
So sarah, in general IHT can be avoided simply by DP giving their house to their child(ren) and then paying the children market rent ?
Why doesn't every
rich bastard one do this ?
cumfy there's a reason the lawyers at my old firm called IHT the "i'm in denial tax". Or sometimes the "I don't trust my kids tax". Giving your house to your children but continuing to live in it requires that you a) plan ahead for your death, and b) make the psychological leap that your house is no longer "yours", which may make some people feel they are losing all the security they've ever worked for, have lost their independence, etc.
Also, many people in this country live in houses that are worth a lot more than when they bought it, or that they could only afford on mortgage payments but not renting. Paying a true market rent may be a big huge proportion of a pensioner's (fixed) income, which they may not actually be able to afford notwithstanding that their house is worth loads.
Just to correct any potential misconceptions - you can't just make your house over into your kids' names and watch the inheritance tax bill vanish in a puff of smoke. There is a concept of a 'gift with reservation of benefit' which means that only really works if you pay a market rent to the owners of the property. Most people do not know how long they will live, and don't have enough income to pay market rent on their property to their children.
The very unfair thing about inheritance tax is that it bites in the middle. The poor don't pay it because their assets are generally not worth more than the inheritance tax threshold (by definition). The rich don't pay it because it is an entirely voluntary tax and can be lawfully planned around. It is only the middle income families who have to pay it. This seems to be to be grossly unfair
As Clouds and Trees said
"Let them have the comfort of knowing that arrangements have been made so that they can forget about it and carry on living their lives."
Draw the line at anything dodgy.
YABU, a wee bit, but your DH and his DB really should at least be prepared to have the conversation.
TBH if your inlaws are like mine, the conversation will mostly involve them explaining their plans, and you saying 'That sounds fine' or 'Oh that's useful to know'. But they want to share the responsibility with you, why are you leaving them to bear it on their own? you really don't have to have or keep the money if you don't want to. And as others have said, the end of life/post-death bit without knowing what people want is utter hell. I have seen relationships destroyed by it. Do you, for example, know what your ILs feel about organ donation? Power of attorney issues? End of life feeding?
I am struggling to understand as my mother and I talk about virtually nothing except death, wills, bequests, funerals and tax planning, but you don't have to be like us. Have the conversation, it's a courtesy to them.
cumfy yes it can but then it generally becomes the childrens second home so any increase in value is then subject to capital gains tax on sale this has a yearly allowance of exemption about 10,000 but capital gains is taxed at 28% I think, most very rich people would probably set up very complicated trusts most legal some borderline some completely dodgy
for an outright gift to be IHT free you must survive 7 years there is a sliding scale if you survive 1-6 years instead, so there is no point whatsoever of gifting your child your house on your deathbed apart from making who it goes to beyond doubt but there is no tax benefit at all unless you survive 1 year and 1 day after gift
you can make gifts every year tax free as many gifts of £250 as you like and more
you can give regular gifts tax free provided it is out of income and does not diminish your standard of living ie giving away gifts so your income drops to the needing benefits/ welfare level this is called impoverishing yourself and can mean you will not get benefits/ care
if it is a large house the market rent maybe £1500 a month and of course they have no control either over the house which the child could sell or over what the children do with the rental income, so if you give it to your children at age 75 and live to 85 you would be paying a total of 180,000 in rent a lot of pensioners do not have that capital although it would appear OP's PIL's do
I've already replied but there was something that drew me back and it was this from your OP he doesn't care for tax dodges. The casualness with which you belittle their "shrewd investments" and "hard work" is breath taking. The blithe manner in which you impugn their character serves only to highlight the defects in your own.
For you to believe them unsanitary in terms of their finances whilst also, simultaneously, being open to receiving ANY of it shows you up as a first class hypocrite.
He has no interest in the actual money and doesn't care for tax dodges
In our case we were asked if we would like property signed over to ourselves and money transferred so that we could escape inheritance tax. We thought that was wrong.
If you are not going to use what is legal as your guide to what is appropriate, that does leave you in a bit of a grey area as to what is and isn't appropriate. What is your alternative guiding principle as to what you will/won't do? Is it that you won't actively seek to reduce tax? So if your employer requires you to register/sign a form to join the company pension scheme, you won't, but if you're defaulted in, you'll accept that? You'll save cash in a taxable bank account, but not open an ISA? If running your own company, you have to actively make a decision to take money out as either salary, pension contributions or dividends, with very different tax consequences. In that case the principle I've suggested doesn't help, so do you maximise the tax bill by taking it as salary?
If it's about morality, why not minimise your tax bill and spend the savings on charity? Or do you think, given a chunk of money earmarked for doing good, government spending priorities are a morally optimal way of distributing that cash?
there are clear government guidelines on what is legal in regards to IHT
1, everyone has a 325 or maybe 350k allowance spouses allowance can be rolled over till death of 2nd party ( to prevent having to sell the house they live in for the most part)
2, any gift given without any strings ie a clear gift ( not a gift with retained benefits) is IHT free after 7 years
3. regular amounts can be given away each year normal allowance 3000 extra for the wedding of child/ grandchild, small gifts of under 250 also exempt
4. setting up a trust fund for a minor so that the money is appropriately managed until given age ( IHT has already been paid on this if over the 350k allowance ) it is just prudent not to give an 18 year old 500k all at once
none of the above are even remotely tax dodges or evasion or illegal
other perfectly legal ways of avoiding tax
4. putting max into your ISA allowance each year
5. claiming gift aid on chairty
6. tax relief on your pension contributions
things get a bit muddier when you get people who are really employees like BBC presenters among others setting themselves up a a company not taking a salary so no tax at 20 or 40% but rather just corporation tax
I think people have blended my posts with that of the OP.
I am not going to detail our spending on here but we do give to charity. We just wanted to pay tax like everyone else but appreciated that DHs grandfather wanted to leave a legacy to his grandson and his great grandson. The money never went to us directly but even if it did I am not sure why that would make us hypocrites. I never belittled anyone's hardwork .
I have to admit I assumed everyone just paid inheritance tax, if it was due . I clearly live in a parallel universe.
Everyone does pay inheritance tax when it is due. But there are entirely legal ways to reduce how much is due. Forget not that most fortunes have alredy attracted substantial tax bills. I for one see no reason why taxed money should be taxed again if that can be avoided.
Thanks for all the messages, well maybe not so much the ones which detail my hypocrisy and other character flaws!
I spoke to MIL about the situation this evening. She seemed pretty relaxed about the whole thing and she and PIL (her ex-husband) are off to talk to someone about their estates in a couple of weeks time. She plans to sell her main house in the coming year, to buy somewhere smaller and to share out the money left in a tax-efficient way. More of a worry for her are the 'things'. She fell out with her brother after her own mother's death and is keen that is doesn't happen again and so she (quite sensibly) wants to give many items away now (especially as she will lack the space for them when she moves). She also asked me if we knew that FIL's estate is going to be split 3 ways, between the boys and his god daughter (which I suspect is a euphamism for 'daughter', but that's not really my business). I didn't, but my husband already knew and has always assumed that would happen.
No talk of the other issues mentioned by posters such as power of attorney or living wills. I don't feel squeamish at all about talking about that sort of thing, but I think that PILs probably do. Far from being frail old folk, they both continue to do intellectually demanding, high-profile work are not really ready to think about the nuts and bolts of their old age.
Glad the convo went well, rc! Yes i can see 'things' may have potential for massive fall-outs, so can see why mil is concerned. Can be trickier than money which at least you can divide equally, unlike the things with huge sentimental value.
Glad it's all worked out.
It's good to talk.
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