Have your parents thought about inheritance tax?

[fini]

However, it depends on which kind of trust is used. If a discretionary trust is used (thereby giving the trustees enough power to decide when and who to give the money to) the inheritance tax provisions ensure this does not escape tax and charge it at half the death rate (therefore 20%). Trusts are also liable to income tax and capital gains tax so further tax could be incurred if, say, a property put into trust increases in value.

In the case of a discretionary trust, however, the beneficiaries can still get their money out if they all agree to disolve the trust. (Whilst it is true that a discretionary trust adds somewhat of a vaguery as to who the beneficiaries are, if the court finds they're unable to say who would be a beneficiary, with certainty, then the trust will be found to not be a trust at all.) My point that, if the trust is for people over 21 then it's on pretty dodgy grounding anyway then, is still, IMHO, valid. Remember that a disctretionary trust IS subject to income tax every ten years so probably not the type of trust most people would want to go for anyway.

fini

 

[Dolly]

My point that, if the trust is for people over 21 then it's on pretty dodgy grounding anyway then, is still, IMHO, valid. Remember that a disctretionary trust IS subject to income tax every ten years so probably not the type of trust most people would want to go for anyway.

I wasn't challenging your point, I was merely adding to it. I agree that trusts are used for mitigating tax liability and that they are dodgy ground because of the collective right of beneficiaries to collapse the trust (if a discretionary trust), or for other beneficiaries who are absolutely entitled (and of correct age etc) to collapse a trust. However, I was merely saying mitigating tax liability isn't as simple as 'put everything into a trust' because a) transfers into discretionary trusts are deemed to be lifetime chargeable transfers and therefore charged at 20% and b) trusts are still liable to income tax/capital gains tax.

 

[tmileson]

It's not money from the government, It's money a family unit has worked to collate. Kids are a part of the primary family unit and should be entitled to the money in the same way a wife is.

It's not a case of 'why should they have it' it's a case of 'why should the government have any of it'.

Exactly!

I work hard and will end up spending most of my life paying off a large mortgage because house prices are expensive in general and in the south in particular. Why should my children not receive the benefit of what i want to leave them, I've already payed tax on the money once and interest over 25 years.

All things being equal if another house isn't over the £275k threshold I'd suggest the person that owned it paid less for the house than I did in the first place. If that another house is only worth say £200k makes no difference, they paid less per month on the mortgage and presumably spent the excess money on their children whilst alive. Maybe my children had 10 years of trainers from Morrisions rather than £100 a pair Nike from "posh trainer shop". I pay more per month on a mortgage and my children get the money in the form of a house when I die.

You talk about meritocracy where that's exactly the opposite of what you want. In a mertiocracy I get to chose where the money I work hard for goes, without it being taken in tax to distribute to other people that had no input into the work i did to earn it. Children have earned and merit the money because they are my children in the same way they "merit" food, milk, electricity and anything else I give them during their lives.

This isn't magic money we're talking about here, it's money I earned, I get to choose where it goes. My children don't pay tax on thing/money I give them before I die, why should they after!

 

[dirtydog]

The principle of paying tax twice on the same money is already well established. You earn a wage and pay income taxes on it. Then you spend what's left and you are taxed again in VAT, petrol duties, council tax etc. Inheritance tax is not unique in that regard.

 

[FreeStream]

So if my dad has a 750k house, I need to pay 40%?

Where the **** am I supposed to get that from? If my parents die next week?

Also, could I buy the house for £1, so then it belongs to me? lol

Conc

 

[tmileson]

The principle of paying tax twice on the same money is already well established. You earn a wage and pay income taxes on it. Then you spend what's left and you are taxed again in VAT, petrol duties, council tax etc. Inheritance tax is not unique in that regard.

No you're missing the point.

I pay Tax on my earnings, then I pay Tax (stamp duty etc) when I buy the house, then I/my children pay tax when i die, then my children pay tax if they ever spend the money i left them in VAT etc...

How many times do you pay tax on the same money?????

Do you pay 40% tax on money/things you give your children when you're alive? Why should I just because I'm dead?

 

[tmileson]

Also, could I buy the house for £1, so then it belongs to me? lol

Conc

Yes, although if they die within 7 years of the house going to you you will be charged tax based on the "real market price" of the house when you bought it for £1.

Tax men have been doing this stuff for thousands of years - they know all work rounds

 

[tmileson]

Do you pay 40% tax on money/things you give your children when you're alive? Why should I just because I'm dead?

I hate to quote myself but i'd just like to point out for the discussion i'm not actually dead yet and using a beyond the grave internet connection....

 

[fini]

You could also start a charity and then bung the money in there - then no tax - it's possible to set up an educational charity and then have the charity spend the money on a single person's education - it's a lot better method then a trust to pay for someone's education that's normally set up. Alternatively you could set up a new religion (the courts do not look into how stupid the religion is (they allowed one case where a woman thought she was pregnant with the second messiah)) and have the 'god' that the charity worships be the child or whomever the beneficiary would normally be (this might work, tbh I can't see why, but at the same time I've never seen it happen either)

fini

 

[Brum Man]

Or you could just get a Whole of Life policy to cover the IHT liabilty.

If you have an estate over 275k you can probably afford the premium to pay for it.

 

[Cueball]

Or just don't live in the UK? There's always that option!

 

[WantoN]

I stand to inherit an awful lot. And it makes me sick that the government plans to take away almost half of what my father has built from the ground up when he passes on.

Most things are being signed over to me, and a lot of excess cash is being placed into non-taxeable investments. I think it's truly disgusting tax.

Ant

 

[Von Smallhausen]

They can raise the threshold to a billion pounds, it still does not hide what a disgraceful and unjust tax it is.

Your parents work hard all their lives to provide for the family and the government says thanks for all your taxes during life .... we'll have some more ... oh, and at 40%. It makes me sick and so bloody angry !

 

[Vanilla]

So if my dad has a 750k house, I need to pay 40%?

Where the **** am I supposed to get that from? If my parents die next week?

Also, could I buy the house for £1, so then it belongs to me? lol

Conc

That's the thing. While you're still mourning you go through the process of filling out the tax forms and they send a letter saying they want £xxxxx. They look at shares, money in the bank, value of property, everything.

On a house of 750k you have a 275k grace, you pay nothing on that. This leaves 475k and the government want the sum of 40%. £190,000.

Most people can't afford this when much of this is made up of the value of the house, they have debts of their own. So they do what is common - they sell the house. Often it's the house you grew up in.

 

[FreeStream]

That's the thing. While you're still mourning you go through the process of filling out the tax forms and they send a letter saying they want £xxxxx. They look at shares, money in the bank, value of property, everything.

On a house of 750k you have a 275k grace, you pay nothing on that. This leaves 475k and the government want the sum of 40%. £190,000.

Most people can't afford this when much of this is made up of the value of the house, they have debts of their own. So they do what is common - they sell the house. Often it's the house you grew up in.

Then where do I live? This country hacks me off in so many ways

Pfft

 

[Sequoia]

How are they punished? They are dead.. they don't care any more. The people whinging are the spoiled kids who aren't happy with their quarter of a million quid plus, they want even more.

Suppose your parents bought a house 15 years ago for £120,000, and you've been living in it with them, as you're still only 18. Over that 15 years, the house has quadrupled in vlaue, so it's now worth 480,000 on paper. To you, it's your home.

Now, heaven forbid, your folks are both killed in a car crash. Yes, you (assuming you're in the will and the only beneficiary) are going to inherit their estate, which consists of car(s), bank accounts, any shares, etc ...... and your home. For arguments sake (and to keep the numbers simple) assume the value of all those other bits (cars, bank accounts etc) is £20,000. The total value of the "estate" is now £500,000.

So you can expect a tax bill for £90,000. If you can't find it, you'll have to move out of your home and sell it to pay the tax bill.


Those who moan about this tax aren't just objecting to having to pay a large chunk of their parents estate in tax, they're objecting to having to move out of perhaps the house they were born and/or raised and call home, because they don't have the wedge to satisfy Grabber Brown and his mercenary crew.

The problem is house prices. Average house prices have risen FAR faster than IHT thresholds. Look at the percentage of the population that get caught by IHT. It's FAR higher now than it was a few years ago, and going up all the time.

Oh, and there are many places (for instance, many London suburbs, where a 3-bed semi-detached with a loft conversion will go for £500,000, or more. So yeah, these people have dome well from house prices, provided they want to move to cash in. If they don't want to move to a cheaper area, or a smaller place, the value is theoretical since the only way to get their hands on the money the house is worth is to move. So that tax bill also probably means you have to move to a much smaller house (or flat) or move to a substantially cheaper area.

This is not just the rich were talking about, but a large number of ordinary working people. It's a postcode lottery, and it isn't just "spoiled kids" that have cause to worry.

 

[dirtydog]

You are right to say that high house prices in the southeast means that more quote "ordinary" people are affected by inheritance tax than elsewhere in the country. It is debatable what the answer to that is though (short of the obvious one which I'm sure you and many would prefer, which is to abolish inheritance tax entirely). One solution would be to make the entire inheritance taxable (at your rate of income tax, ie. tax the first £40k or whatever it is, at 22%, and the rest at 40%); this would at least mean that inheritance tax affected everyone proportionately wherever they lived.

It could however be argued that house prices in the southeast are too high, and if the inheritance tax system can help balance that out in some way then all well and good. In your example, the 18 year old living on his own would either have to take out a £90k mortgage (perhaps with help from his girlfriend or other family members/relatives) or the estate would be sold off and he would be given 60% of the proceeds. He would therefore still be left with several hundred thousand pounds, which it has to be said is more than most of his peers would have when they set out on their quest to find a home at the age of 18. He would also have the option to move to a cheaper part of the country and buy a very nice house outright.

 

[theleg]

Are they all complaining because they think it's right and just, or because they see a part of their windfall being taken away from them.

Are those who are saying its a good thing doing so because they think its right and just or because they arent getting any themselves?

 

[dirtydog]

Are those who are saying its a good thing doing so because they think its right and just or because they arent getting any themselves?

Quoted from yesterday as your post suggests you missed it..

Hey I'm not a hypocrite - it is quite possible I will get a six figure inheritance from my parents.

 

[WIBSBOT]

<Rant>
Me, me, me, me - that's all I can hear from people who are complaining about inheritance tax.

Tell me, what's wrong with giving the money to the government in taxes ?

Taxes pay for the NHS, roads, schools, defence, care homes for old people e.t.c., our society in general which presumably the people inheriting the money will want to be part of.

Government gets less money = we get carper society.
<end rant>