Anyone else now falling into possible inheritance tax territory?

[YumiZumi]

I don't feel rich but I will be dead rich!

Big mortgage, high childcare costs so things are tight but if DH or I were to die, then if the second we're to die soon after - our mortgage would be covered by life insurance, there'd be one death in service (presumably the second death in service wouldn't be part of the estate?) plus our current pension pots which don't seem that large. (Or large enough to give a so called comfortable retirement)

All comes easily to over a million. Yikes!

My bank balance tells a very different story!

This will only affect private pensions which generate a pension pot not public sector pensions.

Public sector pensions typically do not create a pension pot that can be passed on to heirs. Instead, they offer a pension that ends with the pensioner's death. If you are married, your spouse may receive 50% of your pension until their own passing, but this does not extend beyond them.
I knew of someone who dedicated 40 years to their career, only to pass away in the first week of his retirement. Tragically, his pension benefits ended with him.
In cases like these, having a private pension pot would have allowed him to leave a lasting financial legacy for his daughter and future grandchild.

We were anyway, but we've been stung more by capital gains tax increase. We knew that we would get stung somewhere but still voted Labour as we need this to get our public services workable again.

will you give it away to charity?

@Luddite26
They didn't though did they? They've just had 14 years to abolish it and sort out care home fees etc.
They didn't bother.

Yes they did. 💁🏻‍♀️
...but only for the Queen and any future Sovereign. They found time to do that because that was was important to them I'm sure the fact that John Major got Knighted afterwards was just a coincidence.

King Charles seems happy to have benefitted from this. It's hard to know how much extra he got by this special exemption as so much of the Royal finances are shrouded by secrecy,.

I wonder what Prince William thinks about benefitting from this exception. Maybe he is too busy being worried about all the poor homeless people to bother about looking at his own finances and morals.

Absolutely agree.

@Tryingtokeepgoing I agree that unless house prices crash, the number of estates liable for IHT will steadily increase, which isn’t necessarily a bad thing, just needs to be planned for and the rules better understood.

Personally, if I found myself in that situation, I’d also support some local charities that I know do amazing work and don’t waste money.

@YumiZumi I'm in the exact position you are breezily so astonished by. The death of dh in his early forties has left me with over a million in life insurance and death in service payouts. My estate will pay whatever tax is due upon my death, as it should, but I wish my husband could have lived to an age where we were no longer eligible for such payouts. I wish we could have retired together and spent some of what we'd managed to earn in our working lives. I wish I hadn't spent the last decade worrying about dying myself and leaving my children orphaned, and finding myself anxious about not spending money because money would be literally the only thing I could do to give them some security if I died. I find the tone of your posts rather immature and in poor taste. You are not wealthy if you are dead.

No, I'll do what most do and invest it for my retirement and to set my children up with deposits/uni/weddings/whatever. Probably increase our usual chariable donations. But I acknowledge my privilege, it's not an entitlement, and I am more than happy to pay a great big whack in tax.

I'm sorry but what do you actually mean by this?

I really struggle to understand the mantra on MN that people are happy to pay more and more tax for better public services. The fact is that the public sector is not efficient, in many cases it's good money after bad. Where are the requirements to be more efficient etc.

I don't want to pay anymore, I've paid a lot and we continue to pay what's due. We will be doing what we can to mitigate IHT. Those whose money is mainly in property can simply sell their primary residence tax free and down size. Then start passing money whilst they are alive. I would rather do this and see my family enjoy the money than die and it go to the government to piss away. I think we will start to see more planning for retirement and passing money on as people are dragged in.

You don't get a badge for paying more tax than you heed to.

What a heavy load to carry.

That's fair enough. I wouldn't like an American scenario where the wealthy pick and choose their charitable causes instead of paying tax.

These scenarios are better for the economy than you squirreling it away for your children's inheritance, so that's still a gain.

People don't have to be actively pleased to pay more tax (I'm not). But they can certainly be satisfied that it's useful they pay more tax. Public services are a mixed bag, but nobody's being bled dry here anyway.

Exactly. A quick google on savings levels shows:

As of January 2024, a survey from Finder has revealed that the average UK adult has £11,185 in savings. Despite this about 46% of people have £1000 or less in savings and 25% have £200 or less.

https://www.finance-monthly.com/2024/01/the-average-savings-based-on-your-age/

That's not compatible with the notion that the "middle" family inherits a sizeable sum at any stage in life. I think some people have no idea just how little money a large proportion of the population have.

@Oftenaddled It's the very wealthy too, because the IHT threshold in the US is...$11million!

I have no idea of the numbers, but presumably very, very few estates are liable for it.

One of the major issues is that Probate is taking 12-18 months and assets like houses cannot be sold until after the probate has been completed.

probate in England can be done in 6 months, just done it with a friend

If you die shortly after starting to draw a public sector pension, there's a lump sum payment - usually similar to the death in service amount. And spouse's pension if relevant.

You're missing the fact that there is a huge amount of wealth locked up in housing that will start to be released as the baby boomers all start dying.

Save for those friends whose parents end up needing long term residential care, I think pretty much everyone I know (I grew up in SE) stands to inherit at least £500k (in some cases many multiples of this if grandparents /aunts etc die without other beneficiaries)

If the gift thing is possible then I assume people who feel a large pension needs to be passed down then I'm guessing they'll do this or get other tax advice

Turing down a bequest doesn’t reduce the IHT. As IHT falls on the estate, not the recipient…

"I think pretty much everyone I know (I grew up in SE) stands to inherit at least £500k"

I think you are pretty much living in a bubble.

Yes, there are going to be many thousands of people like yourself that this applies to, but compared to the country as a whole, this is a very small number indeed.

You gave a personal example, so I will as well. I am one of the first of Gen X and my mum is one of the first boomers (my dad was a couple of years older).

We live around 70 miles north of the centre of London. According to Rightmove, the median price of a house or bungalow (excluding flats) here is £280k.

£280k will get you a nice 3 or 4 bed semi or detached.

My father passed away last year and my mum lives in a nice bungalow that is worth probably around £320k with no other assets.

So my sibling and I will get around £160k each unless mum goes into care.

With my DH, his parents were in social housing before they died and left nothing for him and his siblings.

We are in this territory but as someone who grew up with nothing and whose siblings worked in NMW jobs all their lives with two still living in rented accommodation past retirement I know what life can really be like.

They will probably just pay into investments in their children’s names instead of their own when they reach limits. Or start giving away property for a £1. My best friend growing up her dad was a property tycoon and he gave her and her 4 siblings a property each for their ‘naming day’ ceremony (ie 6 days old). He managed them but they were in their names and the income was used to pay for their school and uni fees completely free of tax. Same for grandchildren.

When he died he only had £200k to his name officially.

Those with very little also work very hard and pay their taxes. It isn't just the high earners who do

Where have I said that others have not worked hard.
Those that have worked hard and earned little but have made sacrifices to keep their house, should not pass their hard work onto their beneficiaries.