To not see the problem with inheritance tax

[AgaPanthers]

"Millionaire lingerie boss Michelle Mone has called for inheritance tax to be axed to stop the government spending her money when she dies."

Surely it's better than the government spending her money while she's alive? I mean they have to get their hands on people's money one way or another, and if anyone doesn't need it, it's the dead.

"I work really hard every single day - like a lot of people - for my children and for my children’s future,’ she told BBC 2’s Newsnight.
‘I want them to have that little nest for their future and for their children, and I don't see why I, others should work extremely hard, pay your tax and then when you die it is like a double whammy."

I work hard for my children too, so that they have a good education and can make the most of their talents. But I don't really see why my grandchildren, for example, would need to receive my millions (if I had any!) untaxed.

Others seem to feel the same way, giving to charity www.news.com.au/finance/work/tycoons-who-wont-give-money-to-their-children/story-e6frfm9r-1226702468883, rather than enabling several generations of progeny to be idle wasters.

For the record, the IHT rate is 40% above £325k, but for a married/civil partnered couple, the allowance is transferrable, so a married couple can leave £650k (which is 32 years labour at the average wage.) entirely tax free to their children.

I don't know how anyone can read a story like Tracey's and still think that inheritance tax is fair. When that is the real life effect of this tax on people's lives, those that can't see past the 'unearned wealth' argument must be incredibly small minded.

Interesting to see that so many people on here think inheritance tax just affects the wealthy.

Does owning a property in London worth £350k make you rich?

It's also interesting to see that so may people are convinced that it's that easy just to tax plan and then you won't be affected.

A lot of people are asset rich but cash poor. Where are they going to get the money from to pay solicitors to sort it out for them?

But if you are asset rich and cash poor you seriously need to look at that balance. Not everybody can change that but plenty of people can but don't even think about it. Everyone knows death and IHT is going to happen. You can't stick your head in the sand about it - you're doing a disservice to the family you leave behind. The worst thing about it is, the people who inherit are left to sort out the mess, often incurring huge financial issues to do so, not the people who have left it in that state. Somebody said earlier in the thread that this has prompted them to look at their finances wrt death planning. The responsibility is with everybody to do that if they don't want to leave a financial mess for those left behind. Of course, some situations will occur where it couldn't have been foreseen but plenty of older people are leaving a mess for their families when they think they're actually doing them a favour by holding these assets for them. DH and I have done some of it; we need to do quite a bit more. We will have failed our DCs if we don't.

That is not to say that the system couldn't then be fairer in terms of giving time to pay etc., and certainly where minors or dependants are involved there is scope for changing the system. But that old cliche (nothing is certain except death and taxes) means we all need to plan for it, and not assume it's something we can think about when we're older. It's part of being a responsible adult.

I think it would be good if everyone could sign up to a partnership with one other person that was treated for IHT purposes like a civil partnership or marriage. Thus Teeb could do this with her sister and the property pass to her tax free.

I see what you're saying, and agree to a certain extent. But to give a very simple example, take a couple who have paid off their mortgage, their house has dramatically increased in value since they bought it when their children were young just because that's what house prices do, and now they are living on a fairly meagre pension that provides them with enough to live on and give the grandchildren an occasional day out.

Where are they going to find the money for solicitors? Who is going to tell them in advance that this could be a major problem for their children that they have to sort out if they don't already know. Not everyone knows that they have to think about these things, it's not something that occurs to the average low waged working class person, but just living in the wrong place where house prices have gone crazy in recent years makes all the difference.

A large amount of someone's estate is normally due to their house and the main value of this has not been 'earned' as such. Its just due to increases in the property market. So all those who are arguing that people have already paid tax on the money are not really correct - it will only be a relatively small proportion from paid employment

Hopefully their children might tell them? They could get a personal loan secured on the house to pay for advice?

The issue, though, is that most people want to keep their money accessible in case it's required for care home fees; I think it's hard to both have it available for this and protect it from IHT.

There are IHT products around that qualify as long as you survive for two years after setting them up.

Does anyone have anything other than its already been taxed as an actual reason why it should be abandoned?

Yes I do. I don't wan to pay more tax than I have to (actually I pay no tax as tax free salaries and bonus) and iIcertainly don't see why my parents money should go to the Government.

You can't automatically hate everyone who isn't far left or who have more than you. On another thread someone wrote that even if their child's life depended on it they wouldn't access private medicine on proncipler. It is a bit pathetic and sixth formy. I argue that people are allowed to be rich and I can't believe that all of these wonderful, selfless sixth formers posting on how they would care and share alike would be as generous if they had to sacrifice their iPads, laptops etc and go out and do something more useful instead.

Your salary is tax free? I assume you aren't in the UK!

When my parents go, I'll be subject to a large chunk of IHT. I still agree with it. It's a fair redistribution of wealth.

I agree WooWoo. And I don't think that seeing a solicitor will help the couple that you mention very much.

They can't avoid inheritance tax unless they give their house away (and don't die in the next 7 years after that, because until then a sliding scale of tax will be payable retrospectively on gifts).

They can't give the house to their DC and carry on living in it - you are not allowed to benefit in any way from the gift, or it isn't counted as a gift and tax is still due.

WooWoo, IHT should only be paid by that couple on the second death and above the £650k threshold, assuming they are married or in a CP.

www.hmrc.gov.uk/inheritancetax/intro/transfer-threshold.htm

WooWooOwl - but this then gets into the whole argument of elderly couples or single people living in larger family homes they no longer need, thus preventing families accessing these properties, and trapping assets that they'd be better off with as cash because they want to leave an inheritance to their DCs but then their DCs have to sell it to pay IHT and sort out that mess. If people routinely downsized when they're older and stored the excess in more liquid investments then IHT wouldn't be such an issue for their DCs and there'd be more family homes freed up for younger families and they'd have more cash available to spend on sound financial planning. We are ridiculously naive about finances in this country.

We have been having this debate with my ILs recently as they have upsized (!) from a 3 to a 4 bed for their retirement because they can afford it and need space for very occasional GC sleepovers (they're getting bigger, they need more space when they stay!), but won the house in sealed bids against young families who could better use the house. And now they have more if their assets tied up in property rather than as cash... IHT disaster waiting to happen if they don't sort it out.

There! Have I fixed the world yet?

YY Everton mint. People are way too sentimental about housing, wailing 'it's their home'.

I see my house as somewhere to sleep and store my stuff, mainly and wouldn't think twice about moving into a retirement flat when I couldn't manage the stairs and the garden.

Just like in social housing, there are far too many old ladies (mainly) rattling around in family houses, that they can't afford to heat, mainly for sentimental reasons, while there are families crammed into bedsits and flats.

We should encourage older people in social housing that is too large for them to downsize, and perhaps the same should be done for private housing as well, as it would free up family houses for those that need them.

I'm not sure if it's relevant but there's a thread in chat at the moment some three hundred posts long about a woman looking for a three bedroom home in kent within an hours commute of her husbands work to London. It can be pretty startling to see what 300/325k buys you these days in the south, properties which I would consider very normal run of the mill family homes, two ups two down in some cases. Is that what we consider wealthy now? At what point does a roof over your head or your possessions become assets? The other thing with property is that many people pay stamp duty at source, so there's already a tax upon owning your home.

Yes formerbabe owning a home outright anywhere worth £350k does make you wealthy.

At what point does a roof over your head or your possessions become assets?

Yes, these are assets :)

BB - I cannot comment because I am hoping someone will explain what needs to be done wrt IHT. I am not clear on what did happen to you and your brother - am I being thick? I am not brilliant when it comes to money matters but I do want admin of my estate to be as trouble free as possible and I want whoever inherits to pay as little tax as possible.

Babybarrister

It's unfortunate that you lost your DM at such a young age, but you were both adults.

There has been mention of it being possible to delay the payment of IHT on more than one occasion. It's a shame that you didn't know this at the time.

Perhaps will executors should ensure that anyone that will be adversely effected by inheriting such an enormous sum should ensure that they receive appropriate advice on how best to deal with the problem?

I understand property is an asset. I can sort of understand a car is an asset. Why is a children's book gifted to me by an aunt when I was a child considered an asset? Why is all my bedroom furniture counted for inheritance tax?

I am interested to know what IHT products are around that qualify as long as you survive for more than 2 years after setting up? Never heard of any. Thanks

Sorry BB I had only taken in your last post. That is very harsh but I am afraid that the law is the law and does not take into account every eventuality. That is why it is so important I think for people to try to put into place measures to make things easier for those left behind. Very tough to go through this at such a young age.