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Where Taxpayers and Advisers Meet

Reduce IHT for a novice

MarkStuartC
Posts:1
Joined:Wed Aug 06, 2008 3:05 pm

Postby MarkStuartC » Fri Sep 26, 2003 4:03 am

Hello there, my father owns a flat (£250,000 no mortgage) and has assets of approx £190,000. My Mum died 13 years ago and there are 2 sons and 4 grandchildren, can anyone tell me the best way of reducing IHT liability, my father does not really want to take out insurance.
My Dad uses up the £3000 gift every year and has a mixture of shares and various saving schemes.

Any advice is gratefully received.

Regards

Mark

Nigel Lord
Posts:518
Joined:Wed Aug 06, 2008 2:18 pm

Postby Nigel Lord » Mon Sep 29, 2003 4:25 am

Mark

I assume that your father requires the majority of his investments to provide an income. If this is not the case he could gift some or all of these to his descendents as a Potentially Exempt Transfer (PET). This would progressively leave his estate for Inheritance Tax (IHT) if he survived between 3 and 7 years, as follows:

0 - 3 years = 0%
3 - 4 years = 20%
4 - 5 years = 40%
5 - 6 years = 60%
6 - 7 years = 80%
7 years + = 100%

If he does not require all of the income derived from pensions and his assets he may make gifts as part of his normal expenditure. This is a complex but highly efficient method of removing assets from an estate for IHT purposes where professional advice should be sort.

A more sophisticated method of eliminating assets from exposure to IHT would be to take out a mortgage on the property and cover the interest payments with the purchase of an IHT effective investment (e.g. an investment bond gifted to a Discounted Gift Trust). Again, professional advice should be sought.

Nigel Lord
Lord Associates
Taxation & Business Consultants
Caxton House
Old Station Road
Loughton
Essex, IG10 4PE
020 8418 9101 & 07769 931852


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