Is there a legal(ish) way to give cash to our children ?

[bikingdad90]

@Chislenko i would agree with you: I’m worth considerably more dead then alive especially if I pass before retirement;

-my individual critical illness cover would pay off the mortgage
-death in service pension benefit would pay out all contributions to date to my spouse
-work life assurance x4 salary
- house value and cash in the bank.

I’d easily be over the £325k limit and to avoid immediate IHT we’ve put in place wills to trigger trusts.

A point to note about law is that if both parents die together (say in a plane crash or car crash) the older one is deemed to die first and the estate passes to the younger parent. It’s unlikely to be a problem if married or in a civil partnership but could be an issue if ex’s and two families are involved…

 

[chris667]

There's a lot of confusion about IHT here which needs to be cleared up. This applies to married couples and civil partners, and is assuming you have a basic mirror Will which leaves everything to each other on first death and everything to your kids on second death.

First, spouses are exempt beneficiaries. This means they are never liable for IHT in their lifetime. IHT is paid by the ultimate beneficiaries on second death.

Your death in service benefits would go to your wife PROVIDED THEY ARE NOMINATED(it would shock you how many people have their parents and even ex-spouses nominated for death in service benefits) but spouses/civil partners are exempt beneficiaries and are never liable to pay IHT. So while it goes into the taxable estate there's nothing to pay.

If you have grownup, sensible children and the spouse would be OK financially it might make sense to nominate death in service to the kids, as that would mean it passed direct to the children if you died at work. It's not as straightforward as this and you should take professional advice before doing this as you need to understand more implications than I am going to go into here - this could really leave some people stuck. Definitely check with HR who it's nominated to though.

Again, death in service should also be nominated, or it goes into the residuary estate. If it's nominated it bypasses the residuary(taxable) estate.

On second death the kids would be liable for IHT at 40% of your nil rate band (£325,000) and your wife's. However, if you're leaving your home there's a further allowance called residence nil rate band (RNRB). Providing the survivor is leaving the family home to their children depending on the value of the family home at the time that's £175,000 each. If you take advantage of it that's potentially another £350.,000 before your kids pay a penny of IHT.

If your estate is over £1,000,000, your kids will pay IHT at 40% of the remainder. It affects far fewer people than some of my former colleagues would have you believe. My personal feeling is that Inheritance Tax is pretty much the perfect tax. It doesn't affect anyone - your kids still inherit a lot of money. And if it wasn't there, wealth would concentrate amongst an even smaller number of people than it does now.

@bikingdad90 , whoever wrote your Will should have explained this to you when they took your Will instruction. I suggest you go to a proper specialist Will Writer (I recommend the IPW, who are all specialists) and get a bit of clarification on what your Will actually does. It may be entirely appropriate but trusts are complex beasts (the management can be more cash paid to the person that wrote the Will on an ongoing basis after your death). I would suggest it does no harm to get a second opinion.

You can take away three things from this rather rambling post:

1. As a former practitioner I'm dismayed at the paucity and quality of advice given by some professionals. There's a feeling amongst some of them that poor people are not worth their time. If you're paying whoever writes your Will by the hour, that's not a good strategy for you as a consumer.
2. I really don't miss multimillionaire baby boomers who get upset that their kids will start paying tax on investments they made which they knew were taxable when it was possible for ordinary people to buy houses without help from their parents. Also, if I never hear the words "bank of mum and dad" again I'll be very happy.
3. I am glad I'm mostly talking about cycling these days.

 

[DCLane]

Thanks @chris667 - we're about to re-write our wills as both children are now 18 and it's helping give me a push to do so.

IHT is likely to affect both of them if something happens to us before we retire, primarily due to both of us at the same time. My parents have already done their financial planning; my father was a tax specialist accountant. However, we now need to update our documentation.

 

[Amanda P]

Give your children as much as you like or want to give them. If you die within seven years of giving it to them, they'll have to pay inheritance tax on it, so it might be best to advise them not to spend it all at once.

In that unfortunate event, they pay the tax. HMG uses it to pay for schools, roads, hospitals, MPs' salaries, benefits, and all that other stuff we pay taxes for.

Simple.

 

[chris667]

@DCLane, you are assuming your estate will be the same size or that the tax rules will be the same at the time the second of you die. The best thing is to spend! Make the world a better place by buying goods and services from people in your community. You will leave the place you live a better place if you do.

In my opinion you should rewrite your Wills regularly so you know where you'll stand, but the issues around tax and Will trusts are really complicated. And the rules change! Wills I wrote to mitigate tax when I started my career wouldn't work now. No liability on my part if you're wondering - as a practitioner the advice you give can only ever reflect the law as it stands when you take an instruction.

TL: DR; this is a more complicated subject than I'm putting into a forum so go and see an IPW member. The days of generalist little solicitors who keep the meter running while they talk to you is coming to an end, thank god. The number of them that pay 10% of their turnover in PI is telling.

In that unfortunate event, they pay the tax. HMG uses it to pay for schools, roads, hospitals, MPs' salaries, benefits, and all that other stuff we pay taxes for.

Simple.

Bang on. There's much wrong with this country, but tax is a social contract. Too many people forget that.

 

[DCLane]

Thanks @chris667 - our 'current' will was written back in 1992 trying to cover every eventuality at the time; children if we'd had any, care for them, etc. It's now out-of-date and needs changing.

The challenge is I've been buying 'alternative' pension-y things such as paintings, antique books and watches together with putting money into various pensions. SWMBO's company has taken off and suddenly it's all a lot more complicated.

My mother-in-law's dementia, being put into specialist care in Northern Ireland and a 2-year legal process of taking control of her finances has meant we're not going to let our children be in the same position. My father-in-law put everything in her name (house, savings, etc.) as his company at the time was in trouble, she put money all over the place and never told anyone. Now it's no use asking her as she lives in the early 1950's . What SWMBO has discovered as the legal financial controller is that she was quite an astute investor with all his cash. Unfortunately all that is now going on care home fees, but at least my father-in-law can stay in the family home.

We'll get things sorted from a specialist perspective and you've helped give me a push to get on with it.

 

[chris667]

Ah, that can be complicated. You know you can get IHT relief on comapnies, don't you?

Not wishing to be spammy, but www.ipw.org.uk. Develop a relationship with one Willwriter, and talk to them every couple of years. The rules about care fees will almost certainly change in the future.

 

[vickster]

The best thing is to spend! Make the world a better place by buying goods and services from people in your community. You will leave the place you live a better place if you do.

That's my plan especially as I have no dependents (while saving enough to (semi) retire on my terms when I want to)

 

[Chislenko]

Very much in the spend club now. With property etc we would leave a tidy sum and yes we have no children. My niece will be a rich girl one day as she gets all ours and her mum's.

The one thing I would implore everyone to do is make a list (and update when things change) of all your assets (including account numbers etc) and ensure your benefactor / spouse knows where this is.

I deal with all the financial stuff in our household and despite sitting down to have the "I may not be here one day to do it" chat my wife still doesn't get involved but at least she knows where the list is to deal with it should I go first.

 

[vickster]

I do need to make a list of accounts especially with adding a few savings accounts and bonds now it’s finally worthwhile (sort of, ish)

 

[I like Skol]

The way I understood my conversation with the legal bods after my father recently died is that they send out a blanket notification to all the financial institutions to identify any holdings that may be unknown to the beneficiaries.

I'm pretty sure I was aware of all the funds held but this general sweep may pick up others that have been dormant for a longer period?

 

[slowmotion]

Multiple, randomly-spaced visits to ATMs.
Purchase of stout manila envelope and false moustache.
Rendezvous in underground car park.