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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

So wonder how people hang on to family money?

31 replies

byzantinelaws · 30/10/2021 07:06

Someone I know through work comes from a wealthy family who own property/land. Lives in a big house that belonged to the family and was given to him, but seems to struggle with the household expenses and says he can't afford to get jobs done on the house (plenty needs doing)

He is employed in the family business which he says is failing and everything has to be cash - he went to buy a large item the other week and asked me to help collect it in my van, the seller wanted a bank transfer but he said it had to be cash.

If the business is failing why not sell off some of the land/property to help? I'm confused that someone can live like this - they seem to buy a lot "through the business" yet be cash poor.

Coming from a fairly poor working class family where we just spent what we earned, I'm completely baffled by it all. Is he likely dodging tax or something? I also realise it's none of my business really, I'm just fascinated by it!

OP posts:
FreedomFaith · 30/10/2021 09:49

Could also be rich, but just doesn't want to spend it. That's how the wealthy tend to stay rich, they don't spend it, even when necessary.

2319inprogress · 30/10/2021 09:51

My friend was brought up in the family castle (Castle X in Glen X), the castle was held in trust by/for the Clan & when a new leak sprung they would raid the library for an ancient volume to sell. So they would only have (a little) cash to pay for things. The farm kept them in lamb & beef but not much else.

Maybe your friend has cash in a similar manner?

When it's the family legacy you "just can't" be the generation that loses it even though you know you're passing the burden on to your children.

InChocolateWeTrust · 16/07/2022 20:24

If you read up about estates like chatsworth they explain how these sorts of posh family estates are structured to basically avoid losing the estate through inheritance tax.

All the big valuable stuff (land, buildings, any big antiques etc) is endowed to a trust. In theory this will be "independently managed" in reality, the family will be represented as trustees and other trustees will be mates. For the biggest famous estates, the trust will also be a charity. The family pay "market" rent to the trust to live there (often only for a few rooms they "live in").

Tax perks:
a) Income from the estate is funnelled into the trust, which as a charity pays no tax. This means all repairs, extension, acquisitions of new stuff etc can be funded from untaxed income.

By contrast any normal person has to pay for home repairs etc from post tax pay.

b) the family get to continue to essentially have most of the benefit of the house, land, art etc and hand it down for the benefit of heirs, while paying no inheritance tax.

By contrast any other family pay tax when passing down wealth.

c) the family get to only pay "rent" for the rooms they officially use, while retaining enough control to prevent anyone else moving into live in the rest. Often the bit that gets put in the trust is all the big costly bit (the dilapidated expensive to maintain old house) while the family keep other easier assets.

By contrast, I have to pay for my whole house. If I only paid for say, the upstairs, the landlord would no doubt move someone else in downstairs.

Downside: they are stuck with it. Very difficult to move etc without losing the value.

It's a clever swindle though and it's how the very highest aristocracy can maintain their huge wealth. Often they keep proper ownership of the most income generative/low cost assets, and what gets put into the trust is the bit that's too expensive to maintain unless it's in a neat tax free charity

HairyToity · 16/07/2022 20:35

We have some family money. The family ethos:

  • You can live in a house bought with family money
  • You can live in a house owned by the family
  • You can live off income from your job
  • You can live off rents (after maintenance, repairs, money for a sinking fund - the big ones off expenses, tax all paid)
  • You can live off interest
  • You can work in family business and spend some of the net profit (although ideally roll most of the money back in)
  • You do not sell the assets. Once the assets start to be sold, the money gets frittered, and it is soon all gone.

I was basically told money I earnt could be spent, family money had heen built up by people who had worked hard / saved / been entrepreneurial before me, and should be passed down the generations. It is a safety net for everyone.

caringcarer · 16/07/2022 22:04

I will be leaving a significant number of my btl properties to my dgc with my dd having a lifetime interest so she gets rental incomes for the rest of her life but she can't sell them as owned by my dgc. It protects the properties in case of a breakdown of her marriage. It means my sil would have no claim over properties whereas if I left them to my dd he would have. Neither of my ds's have children and both say ATM they don't want children so I can't do this with them. However I am considering putting the properties they will inherit into a trust to protect them. I don't think it is wrong to want to pass wealth on to your descendants. I think it is pretty normal tbh. I would not live in a house falling apart and not get it fixed though.

caringcarer · 16/07/2022 22:08

Just for clarity I pay all taxes due on my property portfolio. I just want to avoid as much inheritance tax as possible. Hence I do the £3000 per year gifting inheritance tax free. That is £1k for each child each year.

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