To mention to my healthy parents in their early 70s to think about avoiding inheritance tax(157 Posts)
Its a morbid subject, but I know you have to sort these things out 7 years in advance to avoid IT.
Aibu to mention that they should think about it now?
They have inherited a lot from one side, and I know do want to pass it on.
Inheritance tax is really unfair
Whilst I always think of King Lear in this scenario, I think YANBU. I'm sure they don't want IT to apply any more than you do.
Hmm, I think you need to tread carefully.
You know your parents best, but I think I would only initiate a conversation if I knew they wouldn't take offence, and even then in a jokey way rather than a sit-down-and-have-a-serious-discussion kind of way. And then take it from there.
How clued up are they about theses things?
I don't think YABU to want your parents to plan, but if you know that they want to be able to pass on what they own, could it be that they've got it sorted and just didn't want to talk about it with you?
How about suggesting they visit an accountant and discuss trusts etc? It may be that this is not remotely suitable but it raises the issue without it sounding like you're after their money
I'd rather lose a bit of inheritance than give my parents the thought that I'm waiting for them to pop their clogs.
it is not at all unreasonable for you to know where their wills are and what their funeral wishes are. This is also a good way of making sure both of these are sorted out.
the 'conditional gift' does rely on them living 7 years after, which of course is not guaranteed.
there are limits to how much of the tax can be avoided, but if they want the max money to go to you rather than the taxman, the adult conversation needs to take place.
It's not a 'bit' of inheritance, though, Princess. It's a bill of 40% of the value of the inheritance (starting at £325000). So the minimum bill is £130000 and they want that paid, regardless of whether you have that sum of fluid cash or not. This is why people generally have to sell the asset they're just gained in order to pay the tax on the asset they've just gained. It's nuts.
Well you know your parents best I suppose but I would never bring up this topic. I would imagine my parents would be very hurt to think I was thinking about how to minimise my tax bill when they died.
You are basically asking them to give you a large cash gift now so you don't have to pay tax? But what if they need the money in the future? They could live another 20 years each how can they possibly tell how much they have to spare now?
Isn't it everything above £325k? So you'd get that tax free then have to pay on everything above that. Seems like one of the fairer taxes to me, if taxes must be taken, given that you've not earnt a penny of that for yourself.
It's 40% above £325000, so the first £325000 is tax free and 40% above that. So the minimum bill is nothing not £130000.
Unless the estate is in the millions, the inheritees still get to keep the majority of the money anyway. If they want to avoid tax, they should talk to an accountant.
IHT is one of the fairer taxes and it should be harder to avoid as only the very wealthy pay it. <awaits army of people insisting that someone with a significant six figure sum is not wealthy >
Plumping - the £325,000 is a threshold so only assets over that amount are taxed at 40% (36% if you leave 10% of your estate to charity). And spouses or those in civil partnerships can transfer their own allowance to the other partner when they die so that if one parent dies before the other no IHT will be paid on the first £650,000 of the estate and only at 40% beyond that. Only if the estate is worth more than £700k where you are dealing with a couple is it worth considering tax planning in my view.
Inheritance tax is not one of the fairer taxes at all, not least because it isn't a tax on inheritance. It's a tax on death.
It would be fairer if it were a tax on inheritance, because then each individual inheriting would pay tax on what they receive. But that's not what happens. An estate worth over the threshold will be subject to a huge 40% tax despite the fact that the actual inheritance received by any beneficiary may be well under the threshold, depending on how many people it's divided between.
My PIL have already set their plan in motion to avoid such a hefty IT bill.
They openly discuss it with us (DH DSIL DBIL) as this way we all know where documents / information can be found.
DH DSIL are also aware of wishes re: power of attorney etc as this came up with DH's grandparents a few years ago.
These conversations, albeit seemingly morbid initially, have to be had to ensure all wishes from the parents are carried out.
I think I would perhaps start with a conversation about wills/ making your own will & see if they are willing to discuss their wishes?
Planning ahead is wise OP.
It's a pretty standard inheritance issue though isn't it? We don't all live in council houses. It isn't an "only the wealthy" issue.
Quite honestly why your parents would be "hurt" or insulted by you asking a perfectly suitable question like "do you have wills sorted? Have you done it professionally? Did you seek financial advice?" Is stupid. It's practical, sensible and prudent. They don't have to even answer much beyond "yes thank you. It's fine"
Yanbu at all. Just preface the discussion with "you know I love you very much and wish you were immortal."
But then they would just divide a massive estate amongst lots of beneficiaries WooWooOwl.
What exactly is unfair about taxing wealthy dead people on some of their assets above a very generous threshold?
Who do you think should be taxed instead? And please don't say Amazon, Stabucks etc because we all know that would require major changes to the entire worldwide tax systems to have any meaningful impact.
following my DFs death this year we are battling with this at moment. My mum now has the inheritance, but they live on a farm which they inherited some years ago that was derelict.
They worked darn hard to rebuild and repair it and now are getting hit with CGT rather than IHT. No allowance for the time and effort they have spent increasing its value. They are retired from farming so its complex.
Was having conversation with my mum yesterday about what we do when she goes.
They are not wealthy, its all in land value.. but only generates a few thousand every year in rental income.
YABU - Sorry inheritance tax is indeed fair. It may not be a perfect system but it's not too bad.
Only 6% of estates pay IHT - if your parents' estate is likely to qualify then that already puts your family better off than 94% of the country. If you don't consider yourselves well off it's probably because you haven't really appreciated quite how many people less fortunate than you there are.
Before any IHT is paid there is £325 per person, so £650k between your two parents, which they can leave tax free. Unless you are one of 9 children that's an awful lot of unearned income for you to look forward to, plenty to ease any pressures you might be facing - and having any inheritance at all puts you so fortunate it's really greedy to be grabbing more.
It is true that many wealthy people evade this tax. A lot of people would say that this is a reason why everyone who can should do so. I think that other people being selfish is no reason to do so yourself.
Each individual gets to enjoy their wealth throughout their lifetime, and when they are dead and don't need it any more they can pass on an amount enough to buy two houses outright to the next generation of their own family with no interference. In the tiny amount of cases where the deceases is so wealthy that there is more than that, then a proportion of that excess goes towards the benefit of the wider society which contributed to the creation of that wealth. I really don't see any unfairness here.
It's a pretty standard inheritance issue though isn't it? We don't all live in council houses
That's quite a nasty comment.
Yes, please do approach them. But it may be more complex than just making a gift (Potentially Exempt Transfer), as depending where their capital is, they may have to pay Capital Gains Tax to release the money.
I know quite a lot about this first hand, but don't really want to share too many details. PM me if you'd like.
Are they using their tax free gifts exemptions (£3K from each to each offspring I think), plus gifts to others £250? My DF has been using his, and is fairly clued up now thanks partly to me and DB. Also regular gifts from income are exempt (but must leave the donors with enough income to live on) - DF has done this with the GC.
Dh is a private client solicitor so this is his area of law. He has no problem ever broaching this subject with anyone, inc his parents. It doesn't have to be morbid. It's just sensible planning for the future.
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