The Lemon Fool

What kind of planning should families consider to protect a significant inheritance or legacy asset?

Xarabr wrote:What kind of planning should families consider to protect a significant inheritance or legacy asset?

Protect from what? IHT? A family member spending the lot? A sudden slump in the value of the asset? Before death or after?

Dod

Assuming that the OP and later post that reads like an advert are not related:

Speaking from personal experience, the key issue is the EFFORT involved. I would strongly advise taking steps to minimise this.

For example, you may hold shares that you received as a demutualisation event. My father-in-law had shares in Sun Life (now a Canadian company). You need to find an official notary if the shares are directly held.

I recommend considering the effort in sorting out directly held shares and would advise holding them in something like an ISA so that such complications will be managed by someone else.

Personally, I won't be leaving a large financial legacy. However, I am thinking about tax for idealogical reasons. Others in a similar position would be best advised not to bother or worry about the tax issue.

What is well worth doing though is ensuring that you have something like a "when I'm gone" document. Identifying where your wealth is kept. Many on TLF will have multiple bank, brokering and pension accounts. Totally ignoring any life insurance or crypto cold wallets.

For those with young children, can I recommend that the legacy you pass on is education and experiences. Once you have it, it's difficult to tax or confiscate.

Urbandreamer wrote:For those with young children, can I recommend that the legacy you pass on is education and experiences. Once you have it, it's difficult to tax or confiscate.

Absolutely this. I took the decision that the kids are far better having their inheritance when they really need it rather than when I'm dead. If there's anything left when I'm gone, that'll be a bonus.

Urbandreamer wrote:For those with young children, can I recommend that the legacy you pass on is education and experiences. Once you have it, it's difficult to tax or confiscate.

But they've had a good go at taxing (reducing) both of those. Many uni's nowadays are former colleges, uplift of naming only. First Class Honours nowadays in many cases are seemingly lower than City and Guilds college quality of old. Lockdown was a taxation of experiences

Gifting then living 7 years is the main one. Or spending. To get under the thresholds. Or if wealthy placed within a trust. But next year almost certainly will expect changes with loopholes closing.

But don't let the tax tail wag the legacy planning dog!

There are lots of non tax issues to think about.
The recipients may blow it all, annoying you a lot (if you're still alive).
Their marriages may break up and it all goes in divorce settlements.
They may pre-decease you and it goes in IHT on their estate.
etc etc

Adamski wrote:Gifting then living 7 years is the main one. Or spending. To get under the thresholds. Or if wealthy placed within a trust. But next year almost certainly will expect changes with loopholes closing.

Don't forget the best IHT dodge of all - being married. And if everything is held jointly then you probably will not need probate either, which is typically a right royal pain in the backside.

Lootman wrote:

Adamski wrote:Gifting then living 7 years is the main one. Or spending. To get under the thresholds. Or if wealthy placed within a trust. But next year almost certainly will expect changes with loopholes closing.

Don't forget the best IHT dodge of all - being married. And if everything is held jointly then you probably will not need probate either, which is typically a right royal pain in the backside.

Typically the biggest difficulty there is with ISAs, which cannot be held jointly.

ps premium bonds as well. I have just been dealing with a relative's estate and I had to send the Grant of Probate to NS&I to transfer over some Index Linked Savings Certificates. I am not sure whether these could have been held jointly or not, but they were not. Land Registry were no problem when it came to jointly held property. They just needed a death certificate.

hiriskpaul wrote:

Lootman wrote:Don't forget the best IHT dodge of all - being married. And if everything is held jointly then you probably will not need probate either, which is typically a right royal pain in the backside.

Typically the biggest difficulty there is with ISAs, which cannot be held jointly.

Yes, that is a dilemma that I wrestle with.

Certainly if Labour gets in and cuts the tax benefits of ISAs, I may well cash it out and stick it all in jointly-held Berkshire Hathaway shares.

PS: Can premium bonds not be held jointly? Although then the maximum holding would be double?

hiriskpaul wrote:

Lootman wrote:Don't forget the best IHT dodge of all - being married. And if everything is held jointly then you probably will not need probate either, which is typically a right royal pain in the backside.

Typically the biggest difficulty there is with ISAs, which cannot be held jointly.

ps premium bonds as well. I have just been dealing with a relative's estate and I had to send the Grant of Probate to NS&I to transfer over some Index Linked Savings Certificates. I am not sure whether these could have been held jointly or not, but they were not. Land Registry were no problem when it came to jointly held property. They just needed a death certificate.

Surely your spouse or civil partner can inherit your ISA tax free bypassing IHT.

https://www.ii.co.uk/ii-accounts/isa/faqs/transfer-isa-to-another-person

ISA inheritance rules
Your ISA can only be transferred to another person after your death. If you die, your spouse or civil partner can inherit your ISA tax-free.

If your spouse or civil partner is not the beneficiary of your ISA, it will become part of your estate and could be subject to inheritance tax.

ursaminortaur wrote:

hiriskpaul wrote:Typically the biggest difficulty there is with ISAs, which cannot be held jointly.

ps premium bonds as well. I have just been dealing with a relative's estate and I had to send the Grant of Probate to NS&I to transfer over some Index Linked Savings Certificates. I am not sure whether these could have been held jointly or not, but they were not. Land Registry were no problem when it came to jointly held property. They just needed a death certificate.

Surely your spouse or civil partner can inherit your ISA tax free bypassing IHT.

https://www.ii.co.uk/ii-accounts/isa/faqs/transfer-isa-to-another-person

ISA inheritance rules
Your ISA can only be transferred to another person after your death. If you die, your spouse or civil partner can inherit your ISA tax-free.

If your spouse or civil partner is not the beneficiary of your ISA, it will become part of your estate and could be subject to inheritance tax.

Yes, this is true. I think of the spouse exemption and ISA perk more as inheritance tax deferrment rather than bypassing. One useful thing is that any investments held in the deceased's name only has the capital gain to the date of death wiped out. I have been using this feature to transfer shares into the widow's ISA, using up accumulated income in the ISA. This would have been far more complicated had the investments been held in joint names.

ursaminortaur wrote:Surely your spouse or civil partner can inherit your ISA tax free bypassing IHT.

Strictly speaking, you cannot "inherit" an ISA. But when you die, your surviving spouse can both inherit the assets in the ISA free of IHT and claim an Additional Permitted Subscription to their own ISA that is equal to the value of your ISAs (they can choose this to be the higher of the value at death or when the accounts are closed - potentially useful to add even more to their ISAs if the market falls). Even if the assets in the ISAs are bequeathed to someone else, the spouse can still make use of the APS.

In practice, ISA providers will transfer the ISA intact to one held with them in the spouse's name.

Lootman wrote:PS: Can premium bonds not be held jointly? Although then the maximum holding would be double?

Premium Bonds cannot be held jointly or in trust. See e.g. https://www.nsandi-adviser.com/premium-bonds.

NS&I wrote:Can Premium Bonds be held in a Trust? No. Only solely named individuals can invest in Premium Bonds.

Also https://www.gov.uk/hmrc-internal-manuals/trust-registration-service-manual/trsm23160

HMRC wrote:Premium bonds: Premium bonds cannot be held jointly or in trust.