To mention to my healthy parents in their early 70s to think about avoiding inheritance tax

[Soamiasnob]

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.

People come out with stuff like 'it's a tax for those who don't tax plan', but would any of those people like to explain how you can effectively tax plan using the family home whilst living in it? Honestly, every scheme gets shut down quick smart.

Different if you have lots of other assets, which can be planned with much more easily.

All these hilarious jokes about a tax on people who don't plan/trust their heirs are in really bad taste.

Also, it's not tax evasion if its done within the rules. It's tax avoidance.

Yes, an important difference between evasion which is illegal and avoidance which is not. Just like with benefits. If you lie to get benefits that's a crime, but if you have any choices that will get you more benefits it makes sense to go for them.

There are plenty of cases where parents have signed over their assets to their children to avoid future IHT, only for those children to then divorce or predecease their parents.

I don't know Peng, DP and I will probably be downsizing as soon as the kids have left home; I've seen too many older people struggling to maintain a big, rambling house, I'd rather spend my retirement enjoying myself.

how about they just downsize and spend it? surely more fun than giving it to the government.

Yes- you can sell your house and downsize. But that should be a lifestyle decision not a tax one. It isn't tax planning.

Inheritance tax is a funny one isnt it?

My MIL is a real lefty, hated Thatcher, says she doesn't like capitalism/the city etc. She divorced my wealthy FIL a few years ago, after 40 years of marriage, during which she was very unhappy and he was financially and emtionally abusive. She got 40% of his estate which amounted to over a million pounds.

The absolute first thing she did when she got the money, was go straight to a financial adviser and started divvying up the money, putting it into trusts and 'gifting' it (we received a significant sum last year), all to avoid the inheritance tax. DH was in a couple of the meetings said the financial just kept saying she needs to 'protect the wealth' over and over!

I don't know, I know that when the time comes, DH will want to do whatever necessary to avoid inheritance tax when it comes to what our children will receive. I can't imagine me saying 'no I think we should just leave it and let the inheritance tax be taken so that our kids get less money?'

I think that most people will avoid paying tax if they are legally allowed to do so (including me). The argument that inheritance tax is an unfair tax though is ridiculous, particularly if the money has been made due to house price increases. Why is it okay to tax people's earnings but not money they haven't earned?

yabu op its up to them to bring it up.

Maybe start talking about your will and your assets as a more subtle 'in' to ask if they've sorted anything, so it's part of a general discussion.

Inheritance tax really is a funny one, and I think it's because of the way it's administered. It's not a tax on inheritance received by a beneficiary, it's a tax on a dead individual that takes away a persons fundamental right to control over the things they own.

Part of the estate may be unearned, but it has been paid for.

Inheritance tax really is a funny one, and I think it's because of the way it's administered. It's not a tax on inheritance received by a beneficiary, it's a tax on a dead individual that takes away a persons fundamental right to control over the things they own.

Dead people don't own things or require "fundamental" rights to control anything.

Many people did earn the money, and paid income tax on their earnings.
They then bought a house out of that taxed income and paid stamp duty land tax.
They did some home improvements and paid VAT
They paid mortgage interest which was not tax deductible
They died and the government said - yes I'll have a bit more please - 40%!

The IHT threshold has been stagnant for many years whilst house prices have gone up. The threshold is not an awful lot in the south east. My DM lives in a 1950s ex council house in south east which needs refurb, it is over the IHT threshold. IHT was meant to be for the wealthy but because of the stagnant threshold it catches many more people now. But it's not bad politics to gloss over this, which is what they have done.

Tax yield from IHT is relatively insignificant compared to income tax on employment and VAT.

It is paid by relatives who often have to sell assets to pay the tax

There is nothing wrong with having an opinion that a tax is unfair.

It is paid by relatives who often have to sell assets to pay the tax

That's a valid objection. I expect when it was set up that having that valuable a property meant you were rich generally.

The other arguments about having already paid tax on it etc are not really because that's often true. Most of the objections boil down to 'but I don't want to' and of course no one wants to pay any tax.

I don't understand the argument that it is somehow more worthy to give your money to the Government via inheritance tax rather than to provide financial stability for your family or to assist charities that directly help people. The noble thought that it would be wisely spent by our fabulously competent governments (of any party) to make life fairer for the less fortunate in society is risible and a triumph of hope over experience.

The National Audit Office calculated that the Coalition government wasted £31 billion in the first 18 months of government alone.

Under various governments £26 billion has been wasted on computer blunders, £18 billion on ID cards. Not to mention taxpayers subsidise MPs' catering costs by £6 million each year. You'd think on a salary of over £67,000 they could afford their own cheese sandwiches.

It's very easy to spend money that isn't yours and Governments find it easier than pretty much anyone else.

They already have income tax, national insurance, tax on savings, tax on spending, capital gains tax, corporation tax, stamp duty etc etc. What do they want - blood?

The roughly £3 billion a year that inheritance tax raises is far better spent ensuring financial stability for your family or would mean a hell of a lot to charities that help people directly on the ground. Whereas the way that Governments chuck money away they could waste that £3 billion in a couple of months if they continue to squander it at the rate they wasted it in the first 18 months of power. The same would be true of a Labour government.

In general money is best spent at the closest level to the recipients - cut out the middle man i.e. the Government.

OP if you think it is too difficult to talk to your parents on the basis that they might think you are fishing for an inheritance ask them whether they would sooner the Government got their legacy or their favourite charities.

I would be delighted if my adult children had approached me if I had not already thought about it. But as you can probably guess I've already made arrangements and sorted out powers of attorney.

One thing which I think would improve the fairness of IHT would be if it didn't get added to the general tax pot but was instead used as a genuine way of evening out the inequalities in society by spreading out all IHT received in a given year amongst all those whose parent or parents died in the same year leaving a total estate of less than the cost of a basic funeral. The less fortunate families would only get a few hundred quid each because of the tiny proportion of estates that pay this tax, but it would improve the fairness.

Completely unworkable of course, but it would be nice.

Paleo that is the naive assumption of most people.

My parents have a large insurance policy written in trust outside their estate to pay any inheritance tax owing, to enable probate to be granted and their assets sold. It is actually quite easy to avoid IT if you are organised and understand the system.

Fish, families can already get a bereavement payment of £2000 to help with the costs of a funeral or whatever they need.

It's not true that people don't want to pay tax. I do want to pay tax, and when my DH died recently I was extremely grateful that I live in a society where we have public services paid for by tax, and that our own taxes contributed to paying for the support we needed.

It's just that I also want my home, that I have paid for, to be given to my children before it is given to the government. As others have said, it's better spent giving my own children some financial security instead of them being part of the millions that can't even afford their own housing without having to claim benefits. It's not the difference between them being rich or not, it's the difference between them being able to afford to live without claiming benefits or not.

I don't have an issue with paying inheritance tax at all. I would rather pay it than expect someone to pay income tax/ ni on their earned money below 15k.

That said we have a completely messed up situation where for very young people getting started now is really really difficult. I have always been of the opinion that it is mine and dh's responsibility overall to provide for ourselves and our family. But I guess that's easy to say if you've been successful in doing so.

Fish, families can already get a bereavement payment of £2000 to help with the costs of a funeral or whatever they need.

I think that only spouses or civil partners get a bereavement payment, not the children. When DH's mother died we had to pay the costs of her funeral as she has no estate.

FishWithABicycle I agree with your idea. I think many people don't realise that the children of people who die without leaving money or property often end up with a bill of several thousand pounds for funeral expenses etc. There is no help for them at the moment. DH and I were in our early twenties when MIL died and had to take out a loan to pay the funeral expenses.

Alibaba- but that isn't avoiding IHT. It is taking out insurance to plan for it.

Alibaba What do you mean by insurance? Do you just mean that they have a life insurance policy that will cover the cost of any inheritance tax that will have to be paid? Considering that they will be paying for the insurance they are not really avoiding anything.