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Three generational family finance organisation for max efficiency

#1
Scene (HYpothetical)

Retired parents sat on 400k house, no mortgage. same in investments/shares. Also two generous pensions

One sister divorced two kids, house, big mortgage (arranged only with help from key worker scheme) mortgage interest only being paid. could not remortgage without large cash deposit or guarantor

Son, property paying for itself in rent, large disposable income and spare 100 k cash

Questions

Are there prefered ways of pushing the money round to optimise financial efficiency across these three family units

Some time in the near future there will be nursing homes and death. How does one go about protecting and profiting from some financial jiggery pokery


I know its a broad subject, but thoughts please
 
#4
Scene (HYpothetical)

Retired parents sat on 400k house, no mortgage. same in investments/shares. Also two generous pensions

One sister divorced two kids, house, big mortgage (arranged only with help from key worker scheme) mortgage interest only being paid. could not remortgage without large cash deposit or guarantor

Son, property paying for itself in rent, large disposable income and spare 100 k cash

Questions

Are there prefered ways of pushing the money round to optimise financial efficiency across these three family units

Some time in the near future there will be nursing homes and death. How does one go about protecting and profiting from some financial jiggery pokery


I know its a broad subject, but thoughts please
just hope for death..cos the nursing home will gobble up the asset...collude with your sister..job jobbed..win..win..!!
 
#6
I think the pillow case firmly applied is the best option, but having watched taggart, rebus and Morse I reckon it would be chokey time before next months crime stoppers
 
#7
Obviously all the smart finance boys are hard at the chang, driving their desks, smashing through till 2200, when they'll hit the town for high glass Ukranian whores, champers and more sniff

Maybe they'll read the thread at the weekend
 
#9
There's probably something that could be done about gifting the property to the children, renting it back and surviving >7 years to escape an Inheritance Tax Liability on the transfer - but it's probably better to take out life insurance on the oldies and then have them bumped off.
 
#10
Make sure the oldies have both names on the house, then when the first one pops off, their share of the property can be given to the two children, reducing the estate size when the second one goes.

You can insure against care homes, but it is bloody expensive, they look at the health of the person and length of expected life in the home. One of my relies had about £140k estate, and they wanted £40k to cover. If they live longer than expected then you don't pay any further fees, but you don't get any money back if they die sooner than expected.
 

walkyrie

Old-Salt
Book Reviewer
#11
Plough all the cash into mortgage to save on interest.

Transfer all the assets into a Ltd Co which can then be solvently liquidated, which can be more tax efficient. Though you'd need proper advice on whether you'd gain or not.
 
#12
The current IHT level is 325k (if one parent dies the 325 threshold is added to the remaining partner - called an inter spouse transfer) giving a threshold of 650k. So IHT would be due on the remaining 150k at 40% = £60000!!!!!!!! to the tax man


The good financial advisor would probably advise - get the parents to change the mortgage to "tenancy in common" as opposed to "joint tenancy" that way if one pops off - their half can be left to the kids. (in trust until the remaining parent pops off). Its relatively cheap to do so dont get ripped off getting it done.
(also make sure it is reflected in the will)
Parents Could start making "gifts"(although there are limits to the max allowed) and hope they live another 7 years as IHT is still payable on a sliding scale from 7 to 0 years. There are lots of rules and a few other tricks to reduce Inheritance tax although the taxman has it pretty nailed down nowadays.

Could the parents act as guarantor to the daughter to remortgage?
Could you buy into your sisters property as a long term investment?
Could you give me £100,000 (worth a try)?

A good IFA should be able to advise -
 
#13
There's probably something that could be done about gifting the property to the children, renting it back and surviving >7 years to escape an Inheritance Tax Liability on the transfer
Not really - the rent would have to be at the market rate to avoid it being a Chargeable Lifetime Transfer, which rather defeats the point.
 
#14
The idea of becoming sister number ones land lord is fine on paper. She is paying interest only and couldn't afford half the mortgage on her single wage. She is basically paying rent on the place and will never own it........

Unfortunately, after x number of years paying rent to big brother she would undoubtably have a sense of ****ing entitlement to either the property or the equity in it as it woud be being paid off.

That and she'd probably chance it and not pay up frequently as she is a feckless ****.....making her homeless for non paymet of rent would go down like a dog shit sandwich and son number one could kiss goodbye to family relations
 
#15
Start with Billywhy and my suggestion about the house first. When the first one pops off, it's a paper exercise, the sister wont get any of the cash, and can't kick the remaining parent out.

He might want to look at a trust fund for avoiding tax, but it does tie the money up and you can't get access to it. This may be an issue if they are currently using the capital to live off investments.
 
#16
Scene (HYpothetical)

Retired parents sat on 400k house, no mortgage. same in investments/shares. Also two generous pensions

One sister divorced two kids, house, big mortgage (arranged only with help from key worker scheme) mortgage interest only being paid. could not remortgage without large cash deposit or guarantor

Son, property paying for itself in rent, large disposable income and spare 100 k cash

Questions

Are there prefered ways of pushing the money round to optimise financial efficiency across these three family units

Some time in the near future there will be nursing homes and death. How does one go about protecting and profiting from some financial jiggery pokery


I know its a broad subject, but thoughts please

Extract from HM Revenue -
You can make gifts to certain people and organisations without having to pay any Inheritance Tax. These gifts are exempt whether you make them during your life or as part of your will.

You can make exempt gifts to:

•your husband, wife or civil partner, as long as they have a permanent home in the UK
•a 'qualifying' charity established in the EU or another specified country (find out more in the link below)
•some national institutions such as museums, universities and the National Trust
•any UK political party that has at least two members elected to the House of Commons or has one elected member, but the party received at least 150,000 votes
Gifts that you give to your unmarried partner, or a partner that you're not in a registered civil partnership with, are not exempt.

Tax efficient giving to charity - the basics

Top

Annual exemption
You can give away gifts worth up to £3,000 in total in each tax year and these gifts will be exempt from Inheritance Tax when you die. You can carry forward any unused part of the £3,000 exemption to the following year, but if you don't use it in that year, the carried-over exemption expires.

In addition to the annual exemption there are other exemptions for certain types of gifts. These are explained below. Exemptions cannot be combined to increase the amounts given away to the same person.

Top

Exempt gifts
Some gifts made during your lifetime are exempt from Inheritance Tax because of the type of gift or the reason for making it.

Wedding gifts/civil partnership ceremony gifts
Wedding or civil partnership ceremony gifts are exempt from Inheritance Tax, subject to certain limits:

•parents can each give cash or gifts worth £5,000
•grandparents and great grandparents can each give cash or gifts worth £2,500
•anyone else can give cash or gifts worth £1,000
You have to make the gift - or promise to make it - on or shortly before the date of the wedding or civil partnership ceremony. If the ceremony is called off and you still make the gift - or if you make the gift after the ceremony without having promised it first - this exemption won't apply.

Small gifts
You can make small gifts up to the value of £250 to as many individuals as you like in any one tax year. However, you can't give more than £250 and claim that the first £250 is a small gift. If you give an amount greater than £250 the exemption is lost altogether.

You also can't use your small gifts allowance together with any other exemption when giving to the same person.

Regular gifts or payments that are part of your normal expenditure
Any regular gifts you make out of your after-tax income, not including your capital, are exempt from Inheritance Tax. These gifts will only qualify if you have enough income left after making them to maintain your normal lifestyle.

These include:

•monthly or other regular payments to someone
•regular gifts for Christmas and birthdays, or wedding/civil partnership anniversaries
•regular premiums on a life insurance policy - for you or someone else
You can also make exempt maintenance payments to:

•your husband, wife or civil partner
•your ex-spouse or former civil partner
•relatives who are dependent on you because of old age or infirmity
•your children, including adopted children and step-children, who are under 18 or in full-time education
 
#17
As you can see from the above post - The taxman has it pretty well nailed down. On someones death, if their estate is close or over the threshold they will go through the deceased persons last 7 years of accounts with a fine toothcomb looking for gifts etc
 

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