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Inheritance Tax Q&A
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Inheritance Tax Q&A's
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Inheritance tax questions - USERNAME: milcurr
Tax Question: I have a life interest in property which will be part of my estate when I die, and IHT will then be payable estate. I assume the IHT on the life interest portion is paid out of the property subject to the life interest rather than out of my own assets? But which part of the estate gets the benefit of the Nil rate band? If I now make a gift or £100,000 to a discretionary trust, while still having a full Nil rate band available, do I have to pay 20% tax when the gift is made or does it simply reduce the Nil rate band? And if it does, does it reduce the NRB permanently or does the 7 year rule apply? Thanks! . . .
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Additions to NZ trust to avoid IHT? USERNAME:arob
Tax Question: I hold a NZ family trust and am considering purchasing a property in the UK. This was established when I was not domiciled in the UK but I am now domiciled here. I understand that UK property will therefore not meet excluded property status and therefore be liable to IHT (unlike NZ property). It has been suggested that I hold any UK property in a NZ overseas company to maintain excluded property status and legally avoid IHT. Would this overseas company need to be in place prior to any purchase of UK assets by the NZ trust or could the NZ trust purchase UK assets as it currently stands and then be restructured in NZ without incurring UK IHT liability as a result of the temporary holding of the UK property in the NZ trust? . . .
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Inheritance tax and discretionary trust - USERNAME:Milcurr
Tax Question: Divorced woman has a house worth £700,000 in which she lives and two other properties which are let, worth about £150,000 each. She does not have much cash and no life insurance or pension - the rent from the let properties provide her with a modest income. She is healthly and in her early 60s so probably ok to make PETs but it may not be wise to give away lots of capital and leave her vulnerable in her old age. Wants to leave her property to her daughter in her will but is worried about IHT. Lack of cash means that CLT must be avoided too if over the NRB. Would it work to transfer a share in the equity of the house that she is living in, equivalent to the value of the NRB, to a discretionary trust of which she is a beneficiary and then she can carry on living inthe house and top-up the transfer later if the NRB goes up or she survives 7 years? Will the fact that she will carry on living in the property (as a joint owner and beneficary of the trust) cause any problems e.g. reservation of use? (Assume that this would be a problem if she gave a share in the property to her daughter, but not sure if using a trust with her a beneficiary will help - and using a trust is good in case she needs money in later years.) She can't afford to take out life insurance. Any other ideas to reduce IHT without incurring CGT or other charges now? Thanks! . . .
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Granting a tenancy to reduce value for IHT - USERNAME:rhealy
Tax Question: A family home is owned jointly by a husband and wife , who's joint estates will exceed any nil rate band, they wish to gift the property in their wills to one or more of their children. would there be any inheritance tax benefit if they first let part (rooms ) of the property to one , or more of the children, in terms of this diminishing the value of the property for probate purposes , (as vacant possession could not be readily obtained) ? Would it make any difference whether the rent payable was a market rent or a below market rent ? would it make any difference if the letting was to to a person or entity not a beneficiary of the property under the will ? . . .
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IHT liability for Mother resident overseas?
Tax Question: My mother has a dutch passport,was married to a UK resident. For the last three years she has lived outside the UK. She wants to gift some money from abroad to her children,some live in the U.K.Are they liable for UK IHT? One of her children lives overseas and would he have any UK IHT liability? Many thanks . . .
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Deed of variation questions
Tax Question: A relative died in Dec 2007. Probate granted April 2009 when we knew how much was left etc. Executors being really dumb and so estate not distributed and probably wont be for 10 years of more. is it too late to do a Deed of Variation in favour of my children ? I dont want the hassle of more IHT planning in 10-20 years time ! Tax Question: Re Deed of Variation : Can I do a Deed of Variation where instead of the money coming to me it goes either to a UK trust, an Offshore discretionary trust or a Uk or non-company, or indeed any 'Tom Dick or Harry' ? What position , if any would I have to hold in either the trust or company ? Many thanks Tax Question: Father set up a discretionary will trust. 4 siblings benefit and are trustees. 3 live in the UK, I am non UK resident. Trust can be ceased at any time, but will probably cease on Mother's death. Can I ask the other 3 trustees to resign (and resign their interest) when my mother dies and do a Deed of Variation (on what she leaves to me in her will) so they get the same amount of money but all that in the Trust is for me and my family and its therefore outside my estate. If they choose to end the Trust early could I give them cash from my own resources and keep their portion in the Trust? . . .
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Inheritance tax and insurance policy in discretionary trust
Question: I am a trustee in respect of a life assurance policy which was written into trust - discretionary, the settlor is not a potential beneficiary. The policy was taken out 5 years ago, all premiums were paid by the settlor. The policy has now paid out under critical illness provisions - so the settlor is still alive. The capital received by the trustees (£800,000) exceeds the current NRB for inheritance tax. The trustees would like to appoint all or some of the capital to one (or more) of the potential benficiaries, and retain some capital in the trust. In particular, IHT concerns me: 1. Is the original settlment a PET and does the 7-year rule still have any relevance, so must we wait until the settlor has survived for another 2 years before we know that the initial gift to the trust is exempt? 2. Are IHT exit charges applicable to any appointment to beneficaries? 3. Will the first 10 year charge be due in 2015, i.e. 10 years from when the policy was written into trust, or 10 years from when the proceeds of the policy was paid to the trustees? I ask this because up to now there have not really been any assets for the trustees to administer so I am not sure when the trust actually commenced. Are there any CGT or income tax issues I should also take into account before making an appointment? . . .
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IHT/CGT on property
Tax Question: My mother and father were separated for many years (although they were still married) up to my mothers death back in November 2008. My mother continued to live in the family home right up to her death. This house however was solely in my father's name and thus did not form part of my mother's estate. My father now wishes to sell the property and divide the bulk of the proceeds between me and my elder brother. we have previously been advised that as this has not been his main residence for many years, it effectively becomes a second home (he lives with his partner elsewhere) and so becomes subject to CGT. This will be a considerable sum. He has owned the property since 1972 and so I understand that the gain is calculated by taking the sale proceeds and deducting from this a valuation at 31st March 1982. We have had this valuation done and this has been put at £70,000. The market value now is approx £400,000 and so a gain on £330,000 is generated. Deduct the annual allowance of £10,100 and we have a chargeable gain of almost £320k. My father is a higher rate tax payer so he is looking at a CGT charge of almost £90K! Clearly we want to do whatever we can to reduce/eliminate this. I've seen several references on the internet about transferring the property into a trust but these seem somewhat contradictory and seem to involve at least one of the beneficiaries having to live at the property to avoid their own CGT liability. This is something my family would consider if necessary. Do we then have to wait until my father's death to transfer it out of the trust? All very confusing. Also, how does also this tie in with IHT? I believe my father is able to benefit from the unused proportion of my mother's IHT 'allowance' which was approx 84%. This would give my father almost £600k at current rates before IHT was due, which should cover the value of his estate. Any help you can give will be greatly appreciated. Many thanks. . . .
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Non Dom exchange gains on foreign pension and inheritance tax
Questions I get a swiss and an italian pension and keep them in separate accounts. I have recently become UK resident but only bring part of my pension to the UK. On my tax return however I would be declaring the whole pension amount,so which exchange rate do I use? What about capital gains as the pensions are put into my accounts monthly but I bring money into the UK randomly.Needless to say ,I do not know the original exchange rate for each sum.Thanks I am a non dom UK resident and plan to buy a house in the UK.For IT purposes,would you advice me to give the legal ownership to my children and retain the beneficial interest. The children are all non dom at the moment. Also ,what would be the implications in the future if they inherit foreign property from me.Should they remain non domiciled?Their partners are UK domiciled.Thanks. . . .
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Structuring purchase of UK property to reduce tax for non dom/non resident
Question: Dear WealthProtectionReport, I am a non-resident non-dom currently based in Hong Kong. Originally from the UK but having lived in Hong Kong for the last 18 years - full-time job in HK, married to a local HK Chinese and owning property in HK. Recently we bought a property in the UK as an investment to let out. This was bought in joint names with an off-shore mortgage. We are now considering buying a plot of land in the UK to build 2 houses which when complete we can either rent out or sell. The land will be bought without any mortgage and the subsequent building costs can also be financed by us without resorting to any loans. My questions are as follows: 1. What would be the most tax advantageous way of buying the land - individual names or set-up a company (if a company should this be offshore ie a Hong Kong company or local UK company ?) what would the tax implications be ? 2. Should we arrange a mortgage for the financing of the construction or pay for this ourselves ? 3. From a tax consideration would it be better to let the properties when completed or sell outright ? We can hold the properties for a few years if need be before selling. Many thanks for your advice. . . .
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Tax for Norwegian living in the UK
Tax Question: I am a European citizen who have been living in the UK for 20 years for work reasons. I still have strong ties to my home country where I spend my holidays, have family, own a property and eventually will retire. I have no income from my home country at present. If I did gain income from my home country either in the form of employment, sale of property or inheritance, what would the tax position be? Does a double tax agreement apply w/ Norway and do I have to pay the £30.000 for non-dom's? What would the position be for the family in my home country if I died? I have no family in the UK but I own property here. Thank you for your help. . . .
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Inheritance tax and gift from Italian parents
Question: Hi, Let's suppose that I have been in the UK for 15 years and paying taxes for 15 years, and I receive a donation from Italy from my parents now, before 17 years have passed. I know there is a treaty stating that if you are from one of the following countries: Italy, France, India and one other you are not deemed to have automatically become domiciled after 17 years. If then after, say, 4 years, both of my parents pass away, do I still have to pay inheritance tax? Or what if they die, for example, one year after the donation so before 17 years have passed? Many thanks, . . .
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Inheritance tax and an usufruct
Tax Question: Thank you for your answers to my previous two questions which were most helpful. I have one further question. I am non-dom and wish to donate my flat in Italy to my daughter. If I have the usofruct (use of the flat till my death when it would pass directly to my daughter) and pay a market rent when I stay in the flat would the flat pass to my daughter free of IHT or do I have to donate the flat outright and pay market rent. Best wishes . . .
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Non dom using offshore trust to avoid UK IHT
Question: I am thinking of setting up an offshore trust while I still have non-dom status. Could you let me know: (a) If the Trust would be free of any inheritance tax even after I lose non-dom status (after 17 years residence in UK). (b) I have UK shares held by an offshore stockbroker. Can I put these into the Trust. Thank you and regards, . . .
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IHT on UK property and non UK residents
Question: My 89 year old Mother based in UK, owns her own house and also has investments, the total value of which will place her estate in the bracket where Inheritance Tax will be paid. I was wondering whether my husband and I, either in our own names or via an overseas company (we are non residents and have been for 17 years)could buy her house and allow her to live in it rent free until she dies. Would we actually need to pay her the money for the purchase price to satisfy the tax man. Could we pay her a discounted price if money requires to change hands. If money has to change hands then presumably she is at liberty to spend that money quite quickly. Are there any other solutions to getting the house out of the estate but not adding the cash price obtained to the estate which would mean the transaction has no benefit. Greatly appreciate your expert advice . . .
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Transfer properties to UK company to reduce inheritance tax
Question: Hi, it is my intention to sell my properties to a company whose shareholders and directors are my 3 children. It is my intention to gift my children some of my loan in the company, as a result of the sale, to reduce inheritance tax. The company files abbreviated accounts. What paperwork do I need to keep to prove the date of the transfer of any loans( for the 7 year rule). What do I need to include in the account notes if anything.Finally, if needed. my children might gift some of their loan back to me in the future, provided they survive 7 years after this return gift is there any other thing to consider and how should we record these return loans, thanks . . .
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