Re: Inheritance tax

Dr A. N. Walker wrote:
In article <XNIKf.32781$Fy4.31424@xxxxxxxxxxxxxxxxxxxx>,
Stephen Glynn <stephen.glynn@xxxxxxxxxxxx> wrote:
More to the point, it's pretty much a voluntary tax.

It's more usually characterised as a tax on the unlucky
or stupid.

Anyone who's
bothered their estate may be liable has only to consult a decent
solicitor or accountant in order to minimise it or avoid it altogether.

Unfortunately, if you do this shortly before you die,
the advice is likely to be that you should have given away most
of your worldly goods seven years earlier. An elderly person
making provision for old age might be expected to take account
of IT; a younger person is not usually expecting to be killed
in a car crash or to get terminal cancer.

Let me declare an interest; before too long, I'll be the main
beneficiary of an estate that hasn't been planned to avoid tax.
However, I'm not particularly complaining that I'll end up with a couple
of hundred grand tax-free plus some more on which I'll have to pay tax.

Right. Your mother's house [I assume she is the relative
you are planning to post-decease] is semi-irrelevant to you. You
might feel differently if you were still living in "the family
home" and found you were forced to sell it.

The problem is that #250K [soon to be #300K] used to be
almost untold wealth, beyond the dreams of most of us. Most of
us lived in houses worth [say, mid-80s] in houses worth less than
#40K and had salaries of less than #10K -- even those of us with
nice professional jobs and living in nice leafy suburbs. Then
those numbers crept up, but the IT limit didn't keep pace --
so that today practically every middle-class, leafy suburb,
professional family has to keep an eye on that limit.

#300K is no longer a mansion, it's just a normal family
house in many places, and not even that in the more expensive
parts of the UK. It's no longer a lifetime of earning, or confined
to a tiny group of fat-cat company bosses, it's six years or less
for a typical professional family. We are advised that to maintain
a reasonable lifestyle into retirement needs a #500K pension pot.
So it's no longer exceptional for someone "normal", like thee or me,
to leave an estate worth anything from #500K to #1M. That means an
IT bill of #80K to #280K -- *unless* we are alert enough to give
most of it to our children *and* lucky enough to survive 7 years
[and for them not to die prematurely].

If IT was a "fair" tax, then all of this would be fine. But
it just isn't. It seems totally wrong to me that a large fraction
of our old people should be having to worry about IT and thereby
being forced [or at least strongly pushed] into giving away their
possessions long before they die, instead of being allowed to enjoy
their decaying years in the comfort they have earned. The solution
is simple: if IT was [say] 5%, or even 1%, then most people would
stop trying to avoid it. It would make more sense to enjoy what
you have than to give it away in order to save a relatively small
amount. Our putative millionaire would surely be much happier to
face a tax bill of #10K than to give his house to his children and
move somewhere cheap in order to avoid it; with his current tax
bill of #280K, he *has* to worry.

However, my beneficiaries won't need to worry about paying it when
I die because I intend to take professional advice on a few simple
measures to avoid inheritance tax instead of saving money in the short
term by buying a do-it-yourself will kit.

Um. Best of luck. Let us know how you get on.


It depends on what you're planning to leave, and to whom. The trick, usually, if you don't want to make gifts inter vivos, is to find a lawyer who knows about inheritance trusts. I first found out about this when the late Mrs G told me something about how her sometime boss, a man with very substantial interests in commercial property, had so arranged his affairs that the taxman will see little, if anything, when he dies; I made a few enquiries and it's perfectly feasible, at least according to my solicitor, to set up something similar on a far more modest scale, though this will certainly involve taking some specialist advice at some point.

I think that, as you suggest, the problem's that most of us haven't, until recently, had to consider IT implications. But, certainly, I'm credibly informed that it's perfectly possible to minimise (and quite possible extinguish) all IT liability without giving away all your estate, so long as you do a bit of forward planning and pay for good advice.

Steve
.

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