Have your parents thought about inheritance tax?

[Borris]

It seems to perpetuate a system whereby the rich (or their offspring) get richer and the poor stay poor.

The poor should eat their young (or at least, their pets).

I don't believe that any poor / rich gap necessarily exists - intuitively, there is a scale.

Neither is there a watershed at which one gets poorer or richer.

However, I do believe that there should be a sliding scale for taxes, with higher rates for higher earners, and this should include inherited wealth.

But, so help me, I will do my best to aviod paying as much of it as possible, which is why I spend money on accountants.

 

[Dolly]

I think there is a case to be made for lowering the inheritance tax threshold personally. I don't see it as fair that the children of better off or wealthy parents should get a huge windfall when their parents die, which means they can then afford to buy their own property (or a more expensive one than they could otherwise afford) with money that they have not earned - when their peers don't have this advantage, and are faced with house prices out of their reach.

I simply don't agree with this. I've always thought that the whole point of working hard/getting a great job/having a successful career etc is so that we can provide for our future and that includes the future of our children and grandchildren.

If I've worked hard all my life in order to provide for my children and give them a better upbringing/start in life than I had, why shouldn't I be able to leave money/assets to my children? Why should my children be held back because it's 'unfair' to the children whose parents couldn't be bothered/didn't have the luck...etc?

 

[dirtydog]

I simply don't agree with this. I've always thought that the whole point of working hard/getting a great job/having a successful career etc is so that we can provide for our future and that includes the future of our children and grandchildren.

If I've worked hard all my life in order to provide for my children and give them a better upbringing/start in life than I had, why shouldn't I be able to leave money/assets to my children? Why should my children be held back because it's 'unfair' to the children whose parents couldn't be bothered/didn't have the luck...etc?

Lowering the threshold to zero wouldn't stop people getting an inheritance, or deter parents from saving for their kids. It would just mean the beneficiary would pay tax on all of it, and why shouldn't they frankly.

 

[Kell_ee001]

so all thats needed is to bump em off?

Yep.... I'm working on it!

But the bloke has had over 9 heart-attacks and several strokes though so I don't think he plans on going anywhere for a while!

 

[fini]

There's a few ways around inheritance taxes, iirc.

Agreed, the best, and most common are trusts (although people forget that a trust for someone over 21 is a bit dodgy because the benefactor can just grab the money whenever).

Lots of people forget one way of getting around it though, which is to set themselves up as tenants in common instead of joint tenants. This means that you both own half (or whatever you want really) of the property and, unlike joint tenants, when you die, the other person does not automatically recieve your half. This is really useful because, if both the people in the couple die together (eg an accident) then instead of having say £150,000 going from A automatically to B, making B's total estate £300,000 and then going on to a child thus incurring inherritance tax, the child recieves two loads of £150,000 shares in property without any tax.


One system I heard argued for, which seems much fairer to me, is one where your main property is not added to your overall assets. This would mean that only people with second homes etc would really have to worry about inheritance tax and the children would always have somewhere to live.

fini

 

[Dolly]

In response to the OP - I had a conversation about this with my cousin a couple of days ago. She didn't realise that there was a £275K threshold and as such had not thought about wills etc. I explained to her that anything passed from husband to wife on death is exempt from inheritance tax. However, although this seems a good thing, if both husband and wife include a clause in their will saying "I leave everything to my husband/wife" then it may seem like good tax planning because whichever one dies first, they don't pay any inheritance tax. However, as has been said, everyone has a nil rate band of £275K and so, for effective tax planning, £275K should be passed to someone (say the children) and the rest of the estate should go to the husband/wife. Effectively, £550K of the family money will then be tax free, as opposed to just £275K.

 

[Mr Jack]

Personally, I'm all for inheritance tax. I'd get rid of the threshold and all exemptions.

Why? Because inheritance is, by it's very nature, anti-meritocratic. By increasing inheritance tax you can lower other taxes and give those earning their own money a break.

 

[Dolly]

Agreed, the best, and most common are trusts (although people forget that a trust for someone over 21 is a bit dodgy because the benefactor can just grab the money whenever).

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.

 

[dirtydog]

All this loophole crap is why the thresholds should be lower to zero or near zero IMO. I would also increase the tax rate from 40% to perhaps 80%.

 

[Dolly]

Lowering the threshold to zero wouldn't stop people getting an inheritance, or deter parents from saving for their kids. It would just mean the beneficiary would pay tax on all of it, and why shouldn't they frankly.

Because, as has been said in this thread we pay so much tax throughout our lives, why should the tax man take another big chunk when we pass on whatever we have left?

I'm not totally against inheritance tax because if we didn't have it then everyone would hold on to everything until they die to get around the other taxes... but, I am against high rates of inheritance tax and low nil rate bands - who isn't?

 

[Dolly]

All this loophole crap is why the thresholds should be lower to zero or near zero IMO. I would also increase the tax rate from 40% to perhaps 80%.

Then the new loophole would be to just give everything away in our lifetime

 

[dirtydog]

Because, as has been said in this thread we pay so much tax throughout our lives, why should the tax man take another big chunk when we pass on whatever we have left?

See my previous posts. Effectively the person receiving the inheritance pays the tax, just like if they earned the money they'd pay income tax on it.

I'm not totally against inheritance tax because if we didn't have it then everyone would hold on to everything until they die to get around the other taxes... but, I am against high rates of inheritance tax and low nil rate bands - who isn't?

Me and Mr Jack for a start Do you acknowledge that inheritances are anti-meritocratic?

 

[dirtydog]

Then the new loophole would be to just give everything away in our lifetime

You can do that now but if you die within 7 years it still classes as an inheritance. Also what if you gave away your money to your kids but then needed it for yourself - even if your kids were willing to give you the money back, they might have spent it already. There are two reasons not to do as you suggest.

 

[Dolly]

See my previous posts. Effectively the person receiving the inheritance pays the tax, just like if they earned the money they'd pay income tax on it.

Well, a lot of the time the inheritance tax has to be paid before the PRs can distribute the estate - so it usually just comes out of the estate, thereby lowering the amount the beneficiary receives. You could look at it and say 'the beneficiary pays the tax' but in most cases, the estate is just reduced (assets are sold to pay the tax) and the beneficiary receives less, and as such the estate tends to bear the tax.

Also, I haven't said that the beneficiary should get the inheritance for nothing (it would be nice ) but that the rates etc should be lower, so we can all enjoy our 'income' a bit more.

Me and Mr Jack for a start Do you acknowledge that inheritances are anti-meritocratic?

Of course, those receiving large inheritances will not necessarily have to work as hard as their parents did and this could be said to be a disincentive to achieve. However, by the time someone actually receives inheritance money they will be adults and should/would have achieved in their own careers etc anyway. So, in essence although inheritance may theoretically be anti-meritocratic, in practice I doubt that it actually has such an effect.

 

[Dolly]

You can do that now but if you die within 7 years it still classes as an inheritance. Also what if you gave away your money to your kids but then needed it for yourself - even if your kids were willing to give you the money back, they might have spent it already. There are two reasons not to do as you suggest.

Well obviously people will not give away assets unless they can afford to do so. If they die within 7 years the tax bill is still less that it would be if they give it away on death because of the taper relief available:

If the transfer was

- within 3-4 years before death only 80% of the charge needs to be paid
- within 4-5 years before death only 60% of the charge needs to be paid
- within 5-6 years before death only 40% of the charge needs to be paid
- within 6-7 years before death only 20% of the charge needs to be paid

 

[TrueBlue]

my parents rang me up saying i should watch that documentary on Sky soon about that kid who bumped his parents off to get their money but got found out and is now spending his life in prison.

i think they seriously believe im contemplating it

 

[dirtydog]

To all intents and purposes, the person receiving the inheritance pays the tax, just as if it was income received.

Also, while it may be generally true that people don't receive an inheritance while they are young (although many do), the knowledge that they will receive it must make some people spend beyond their means, knowing that mummy and daddy's money will bail them out in future.

As far as I can see, inheritances must contribute towards pushing up inflation, particularly house price inflation which is greatly to the detriment of those who may have worked just as hard or harder but who did not get any inheritance.

 

[Humpty]

.....If you were in the position of not having the cash/get a loan to pay the tax the tax man will sell the house for you (usualy at auction at a knocked down rate). You can't sell the house first to pay the tax....

I don't think this is actually correct. The tax liability falls to the estate of the deceased and the inland revenue must be paid before the balance of the estate can be dispersed to any next of kin or benificiaries named in a will. This being the case; the house (or any other assetts) can be sold by the executors in order to pay the inland revenue. In fact, the executors have a legal responsibility to get 'market price' for any assetts sold. But you are right in saying that the house cannot be 'given' to you if the death duties have not been paid.

 

[theleg]

The real rich will alway get around such things...the poor who worked their bums off their whole lives to provide for their kids..they are the ones who get hit by this..

 

[Bracco]

I think there is a case to be made for lowering the inheritance tax threshold personally. I don't see it as fair that the children of better off or wealthy parents should get a huge windfall when their parents die, which means they can then afford to buy their own property (or a more expensive one than they could otherwise afford) with money that they have not earned - when their peers don't have this advantage, and are faced with house prices out of their reach.

So you don't believe it's enough that the parents have already been taxed on the money that they are saving to help their children do better than they did, but you think the children should pay a second tax? This is not tax-free money we are talking about, it asking two parties to pay tax.
Assuming that the parents are above the lower tax rate threshold (to be able to afford to have >£275k in assets) then that means they have probably already paid ~40% tax on the money they wish to pass on. This means that after all of their hard work, only 50% of this money can actually be inherited.

Most parents work to provide for their children, and if they are in a position to help them, then why should they be hindered? I cannot understand the mentality of someone who thinks that every generation should have to start from scratch and shouldn't be given the opportunity to have a better standard of life.