adrianc
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Post by adrianc on Jul 7, 2023 14:11:53 GMT
Mmm. The phrases you might like to investigate are "gift with reservation" and (when it comes to care costs) "deprivation of assets". I think that martin44 was talking about the general situation, not this specific case. My understanding is that you can gift your house to a son or daughter without inheritance tax provided: * you live for 7 years after the gift is made Yep, the usual IHT taper. That's the "gift with reservation" bit. Yep, "(when it comes to care costs)". That's the bit that people think they're REALLY WINNING at, and there's no time limit.
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Post by bracknellboy on Jul 7, 2023 14:54:45 GMT
Mmm. The phrases you might like to investigate are "gift with reservation" and (when it comes to care costs) "deprivation of assets". I think that martin44 was talking about the general situation, not this specific case. My understanding is that you can gift your house to a son or daughter without inheritance tax provided:
- you live for 7 years after the gift is made, and
- you do not continue to benefit from the asset after the transfer (for example by being allowed to remain in the property rent free)
I didn't think that deprivation of assets affected inheritence tax. It just means care home fees will be higher, because your local authority will asses them on the basis that you still retained the asset.
actually, he was de facto talking about the specific case as well. adrianc called it - the specific case - as 'defrauding', which was then challenged/contradicted by martin44. Who then went on to cite the general case. And in this case, there was frankly an attempt to defraud. Albeit a alarmingly poorly executed one, and a situation which really should have been challenged by the solicitor who did the change of ownership contracts - although of course maybe they did but the bonkers woman went ahead anyway. In this case she was clearly trying to have her IHT cake while continuing to eat it by not paying any rent - let alone fair market rate - which would therefore have invalidated the whole IHT relief attempt. And also not telling her daughter who might have questioned it. There could frankly be no clearer case of reservation of benefit than continuing to live in it FOC AND not telling the person you have transferred ownership to that in fact they are the new owner. All of these points are why it is probably remarkably rare to gift your primary residence as an IHT avoidance strategy. As always, it is the richest that can "afford" IHT tax planning. got 3 houses and plenty of income without them ? Gift one to your beneficiaries a few years beforehand.
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adrianc
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Post by adrianc on Jul 7, 2023 16:36:09 GMT
All of these points are why it is probably remarkably rare to gift your primary residence as an IHT avoidance strategy. I suspect it's more common than you think, for both IHT and care reasons. It just rarely goes this spectacularly wrong - publicly, at least.
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Post by bracknellboy on Jul 7, 2023 19:39:30 GMT
All of these points are why it is probably remarkably rare to gift your primary residence as an IHT avoidance strategy. I suspect it's more common than you think, for both IHT and care reasons. It just rarely goes this spectacularly wrong - publicly, at least. It could be more common. But I'm still doubtful that it would be a common ploy (at least if they have taken any useful advise) for those other than the particularly well off. Lets say I gift my house. For it to work, I can't live there for free (know that you understand that). So I have to pay a fair rent. Now, if a beneficiary of my will, or the person I gifted the house to (if not one and the same) was to give me money to cover the rent, then you have "a fail". If I live there for free, then also "a fail". On basis of reservation of benefit. So I need to have a) sufficient other assets or income to cover a fair market rent b) confidence those will last sufficiently long to continue to death c) not be diagnosed with a terminal condition that will see me pop off before at least a meaningful amount of IHT gift tapering kicks in. For care reasons....more complicated I suspect. I've not looked at it (but understand the principle that deciding to give away your main assets in order to avoid liability for care costs is one that authorities are "aware of". There was a time when it was oft advised that married couples drew up wills that passed 50% of the property into a trust on first death (and I believe requiring that the property was passed first into "Common Tenancy" rather than the more normal "Joint Tenancy"). There were two aims: IHT avoidance; and ring fencing 50% of the main residency value with respect to Local Council claim for care home costs for the surviving partner. I believe the first aim is fully nullified by the changes such that first death spousal allowance is transferred to the surviving spouse. The second is of quite dubious benefit. The reality is that in the vast majority of cases the beneficiaries on second death will be the children. And if the local authority no longer has any of your assets to call on to cover care costs, you may be moved to a less costly care solution. In the majority fo cases the children are going to say "no" and cover the costs of as is (knowing they going to receive the 'ring fenced' assets on death). So it becomes a zero sum game - except for the legal costs associated with the whole trust thing.
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keitha
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Post by keitha on Jul 7, 2023 20:12:36 GMT
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agent69
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Post by agent69 on Jul 7, 2023 22:21:46 GMT
The one I can never work out is football clubs. Several have gone bust over the years, so let's take Glasgow Rangers as an example. They went pop in 2012, but when it came to selling assets of the club to pay creditors:
- The ground wasn't sold. and
- None of the players were sold
Instead both of these valuable assets reappeared with the newco playing in division 4 of the Scottish league. How does that work, when if you sold your star center forward it would probably pay off all your debts?
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Post by bernythedolt on Jul 8, 2023 1:11:08 GMT
I suspect it's more common than you think, for both IHT and care reasons. It just rarely goes this spectacularly wrong - publicly, at least. [...] There was a time when it was oft advised that married couples drew up wills that passed 50% of the property into a trust on first death (and I believe requiring that the property was passed first into "Common Tenancy" rather than the more normal "Joint Tenancy"). There were two aims: IHT avoidance; and ring fencing 50% of the main residency value with respect to Local Council claim for care home costs for the surviving partner. I believe the first aim is fully nullified by the changes such that first death spousal allowance is transferred to the surviving spouse. The second is of quite dubious benefit. The reality is that in the vast majority of cases the beneficiaries on second death will be the children. And if the local authority no longer has any of your assets to call on to cover care costs, you may be moved to a less costly care solution. In the majority fo cases the children are going to say "no" and cover the costs of as is (knowing they going to receive the 'ring fenced' assets on death). So it becomes a zero sum game - except for the legal costs associated with the whole trust thing. My wife and I have these wills. You are correct that the property first has to be re-registered to "tenants-in-common" for this to work, because ownership of the more usual "joint tenancy" property automatically passes 100% to the surviving spouse upon first death, before the will even comes into play. Tenants-in-common each own their share outright, meaning that share can be left in a will trust for a named beneficiary(ies). There is a further consideration. If the surviving spouse were to remarry and then dies first in that new marriage, the property could well pass to the newcomer and his/her family. I've actually known this situation arise, where a friend of ours lost all inheritance in her parents' property, which passed to the new family when her second parent remarried then died (either intestate or as a tenant-in-common - can't recall which). By placing your 50% of the property into trust upon first death, you can ensure your own children get at least that share, irrespective of what your spouse later goes on to do.
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adrianc
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Post by adrianc on Jul 8, 2023 6:41:39 GMT
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Post by bracknellboy on Jul 8, 2023 7:04:42 GMT
[...] There was a time when it was oft advised that married couples drew up wills that passed 50% of the property into a trust on first death (and I believe requiring that the property was passed first into "Common Tenancy" rather than the more normal "Joint Tenancy"). There were two aims: IHT avoidance; and ring fencing 50% of the main residency value with respect to Local Council claim for care home costs for the surviving partner. I believe the first aim is fully nullified by the changes such that first death spousal allowance is transferred to the surviving spouse. The second is of quite dubious benefit. The reality is that in the vast majority of cases the beneficiaries on second death will be the children. And if the local authority no longer has any of your assets to call on to cover care costs, you may be moved to a less costly care solution. In the majority fo cases the children are going to say "no" and cover the costs of as is (knowing they going to receive the 'ring fenced' assets on death). So it becomes a zero sum game - except for the legal costs associated with the whole trust thing. .... There is a further consideration. If the surviving spouse were to remarry and then dies first in that new marriage, the property could well pass to the newcomer and his/her family. I've actually known this situation arise, where a friend of ours lost all inheritance in her parents' property, which passed to the new family when her second parent remarried then died (either intestate or as a tenant-in-common - can't recall which). By placing your 50% of the property into trust upon first death, you can ensure your own children get at least that share, irrespective of what your spouse later goes on to do. That is a good point. It wasn't something I had any reason to give consideration to with regard to my parents will when my mother passed away (age etc.) with this arrangement in place in their wills. We almost did a deed of variation on the wills to remove the trust aspect, but for unconnected family reasons decided not to (actually, not entirely unconnected but not going to expand on here, other than to say that the protection from future change on my father's will was the consideration).
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Post by bracknellboy on Jul 9, 2023 7:02:58 GMT
 I'm not making any political point here. I put this here for amusement but also because its an unusual perspective measurement. And it made me smile.
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Post by martin44 on Jul 9, 2023 21:01:33 GMT
Nope.. it is quite legal to gift your house to a family member to avoid punitive taxes Mmm. The phrases you might like to investigate are "gift with reservation" and (when it comes to care costs) "deprivation of assets". And you should investigate the legal right to gift your property within the law to avoid the deprivation of assets... your whole assumtion is made around the facts that someone would be committing an act of unlawfulness ... there is a completely legal way to transfer ones assets.
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Post by martin44 on Jul 9, 2023 21:06:18 GMT
The only downside to that story is,... there are many many coutts bank account holders who have only thousands in their accounts. I don't know, but they may be impoverished titled or formerly important people that Coutts think enhance their reputation. A pleb who had money would probably get dumped if they cease to have enough money. Coutts can do what they like if you drop out of their criteria, let you stay or boot you out.And therin lies the whole problem, so lets assume all banks can take the same line.... so where does that leave us plebs with no money? ... IMHO it is a human right for evryone and anyone to have a bank account... when did you here a released murderer or pedo having their bank account closed?
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Post by martin44 on Jul 9, 2023 21:09:14 GMT
although particularly stupid if you gift it and then continue to live in it without paying a fair market rent, such that you have not a hope in hell of avoiding it being counted as part of your estate on death while at the same time being at risk of being kicked out of it by the person you gifted it to. This is something the particularly wealthy might do: i.e. gift property that is not their main residence. Gifting your main residence is rarely going to work, unless you are prepared to a) make rental payments to continue living in it and b) are willing to take the risk you might be asked to vacate your home. For these reasons it is in fact rarely done. The period is simple in law... its 7 years.
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adrianc
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Post by adrianc on Jul 9, 2023 21:51:34 GMT
Mmm. The phrases you might like to investigate are "gift with reservation" and (when it comes to care costs) "deprivation of assets". And you should investigate the legal right to gift your property within the law to avoid the deprivation of assets... your whole assumtion is made around the facts that someone would be committing an act of unlawfulness ... there is a completely legal way to transfer ones assets. the home you continue to live in, with no market rent being paid... and the "beneficiary" being unaware of the transfer? Yeh, not that.
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Post by Ace on Jul 9, 2023 21:52:24 GMT
although particularly stupid if you gift it and then continue to live in it without paying a fair market rent, such that you have not a hope in hell of avoiding it being counted as part of your estate on death while at the same time being at risk of being kicked out of it by the person you gifted it to. This is something the particularly wealthy might do: i.e. gift property that is not their main residence. Gifting your main residence is rarely going to work, unless you are prepared to a) make rental payments to continue living in it and b) are willing to take the risk you might be asked to vacate your home. For these reasons it is in fact rarely done. The period is simple in law... its 7 years. You seem to be missing the point that the 7 year rule will only apply if the person gifting the property no longer continues to live in it or they pay the recipient full market rent for doing so. This info is included in the link you posted.
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