Rookie Investor;311567 wrote:Newbie;311557 wrote:Rookie Investor;311553 wrote:I'll be leaving anything left to my sibling and nephews. I might leave some to charity as well but not thought about yet.
The problem is leaving to charity does not mitigate IHT much at all. I think just reduces the rate the estate pays from 40% to 36%.
Anything left to charity gets deducted from the estate before IHT is calculated,
So often, people will bequest an amount to charity which brings their estate down to the nil rate band so no tax is payable. Other strategies include funding a pension which they themselves will not draw upon and put down the beneficiaries whom they want to pass the monies down to.
A neighbour is gifting circa £300k to various charities including the local NHS trust. Another gifted £140k to certain charities and left the rest to their nieces and nephews (they had two sets of allowances given they were married)
Yes my mistake, I read it incorrectly.
Does the pension contributions work in practice, as in no investigations or questions from the taxman?
That might be the best way if you know you don't have long to live. Completely tax free to draw if death before 75.
If no issues might use this strategy for my parents estate if required.
Even if after 75 - providing they do not draw in a lump sum and take as income, then they pay their marginal tax rate. Now imagine if the have no income, then they get the NIL rate allowance of £12.5k, so if the nephews have children then you can nominate them (grandchild) as beneficiaries and the funds be used for things like their education, holidays etc, with each grandchild getting a £12.5k allowance.
Also remember that being a beneficiary pension they do not need to wait till 55/57 to access it. Just need to ensure that some numpty law firm or stupid adviser does not mix that pension with the beneficiaries own pension and keeps it completely separate when transferring it and have it marked as a beneficiary pension.
I tend to recommend to friends and family to not even put it with the same platform/provider as the beneficiaries existing pensions when transferring. It is also a reason why I tend to get itchy about advisers pushing the consolidation angle (with simplicity and ease - but for whom ?) with large pension pots and people with IHT problems.
Alternatively your nephews can leave the funds in the pension for future generations.
As for the taxman, they always have the right to question it. However IME they rarely do dspite it having to be input into the probate forms. They seem to be more focused on getting the date to capture more people into the tax system so they can track where and when to look to attain more tax later down the line - you have to appreciate that HMRC is very good at targetting and being successful with those file returns but have a far lower success rate at capturing those who do not as they do not exist on records.