IHT query and posisble exemptions

[hpsims]

Hi all,

I have a relation who has a considerable estate including his home.
he has asked me to look into ways in which he can minimise the amount of IHT paid when he passes away to ensure that as much as possible is left to look after family members so they are cared for and looked after in their later years.

He currently is using the following IHT exemptions
1. Annual allowance £3,000
2. General gifts to people of £250
3. Gifts which will not be taxed if over 7 years (made one but due to his age do not want to do any further incase the tax amount is still high.)


Are there any other exemptions that he could be taking advantage of - he is not looking to anything risky such as VCT companies etc.

I am aware of giving a regular amount of money that is not from his capital but income, as long as his standard of living is maintained.
1. what is this and how can this be utilised.
2. what requirements need to be meet for this and how many relativies can this apply to (1 only or more than 1)- sister, nephew, neices, great nephews, great neices, etc.
3. Are there any other such exemptions that can be used other than just using the money.

thanks for all the advice and suggestions in advance

hpsims

[Lee Young]

Taking into account his current income and expenditire if there is a surplus of the former over the latter then a gift of thatincome will be exempt from income tax provided he estabalishes a pattern of giving. This is best done by paperwork evidence and withthe benefit of legal/tax advice.

What about funding the IHT bill that mioght arise buy taking out a life policy and settling it on trust for his intended beneficiaries. The monthly premiums are likely to be exempt under the surplus income rules and the proceeds on death do not form part of his estate.

Does he benefit from a transferable nil rate band?

Has he inherited in the last 2 years?

[hpsims]

Hi,

Thanks for the quick response.

1. If a pattern of giving is set up is there any requirement of what this giving is for.
2. IS a legally bindinig docuemnt signed by a solicitor required confirming this pattern of giving or just some signed and dated document witnessed explaining what this is for and that it is out of surplus income.
3. Can this be for 1 relative or can this be used for multiple relatives as long as only the surplus income is used.
4. not sure what is ment by settling the life policy on trust. If he was to set up a life policy then am I correct in assuming the premiums for this life policy would be exempt using the rule above to enable sufficent funds be set aside to cover the IHT bill that will arise. This will then not be part of the estate and taxable but would just be a policy paid out to pay the IHT bill.
5. there are no transferable Nil rate band as he is widowed a number of years ago when the IHT allowance was fully used.
6. He has not inherited within the last 2 years.

sorry for all thw questions

hpsims

[Lee Young]

1. No.
2. No. Essentially evidence is needed, a paper trail; contemporareous notes are best.
3. Multiple as ling as the gifts come from the surplus income.
4. Yes. The policy would only not be in the estater though if it were written in trust. The IFA or your solicitor can help withthis.

[musuoka]

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[LMT]

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