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Listener Questions 18 - IHT, Trusts and Care
Episode 580
We’ve managed to cobble together another themed Q&A episode, this week dealing with questions around Inheritance Tax, Trusts and Care planning. Lots for Roger and Pete to get stuck into!
Shownotes: https://meaningfulmoney.tv/QA18
00:48 Question 1
Hi Pete, Hi Rog, Thanks for your ongoing work on the Podcast, I’ve been listening for many years and have learned a great deal from you both. Keep up the good work!
My question is in relation to trusts. My parents, both aged 70, have recently got round to updating their wills, putting POA in place for finance and health and have been in discussion with a solicitor about putting a trust in place, primarily to safeguard their assets from being used up in the event of them having to go into care in later life.
At present I believe their estate to be approximately £600,000 including their house which I would imagine is worth approximately £250,000. The rest is made up of savings. I don’t believe their estate would be subject to inheritance tax so I don’t believe this is the reason for setting up a trust.
I have listened back to your previous episodes on trusts but I was wondering, firstly whether much has changed since these podcasts in relation to the general setting up and management of a trust?
Secondly I wondered if you could explain the negatives to my parents putting the majority of their assets into trust, namely are there any ongoing fees, can my parents take assets out of the trust should they need to and what are the tax implications for the beneficiaries when my parents pass away? Would any of these things change in the period where only one of them has passed away?
I appreciate this is a huge topic and you may not be able to address all of these queries but it appears they have been advised of the positive parts of this process but I would like to ensure we are aware of the potential pitfalls. Thanks once again! Jon
11:10 Question 2
Hi Pete and Roger,
Still loving the show and I'm enjoying the current variation in format - keep up the fantastic work! My question relates to estate planning:
My wife and I own our home (mortgage free) 50/50 as tenants in common. We have up-to-date wills, LPAs, expressions of wishes and "Dead Files" set up. Each half of the house will be left to our daughter as and when, with the appropriate "right to reside" wording in place for the remaining partner. We are both in our late fifties, so hopefully not needed for many years yet.
The IHT side is fine as it's just numbers - allowances and values etc. What I can't quite get my head around is any potential CGT liability for our daughter following the second death. Not so much for the financial impact, as she is already comfortable in her own right (with my and - via the podcast - your encouragement over the years) and will inherit further monies when we pass, but more from a planning perspective.
I have looked online and disappeared down several rabbit holes, but from what I can gather although she inherits half the house on the first death, essentially because the surviving partner continues to live in it and therefore any actual money can't be realised, CGT is only calculated from the date of the second death (assuming she sells the house at that point).
Is this correct, or will her CGT liability on half of the value start on the first death and be based on (half of) the house valuation at that time, as obtained for that probate? Maybe I'm taking the planning a little too far, but I like to be prepared. These circumstances will be more and more relevant to families over time, I'm sure.
Your usual wisdom and common-sense views would be very much appreciated (even if the answer is "...it depends!"). Thank you again for the information and humour the two of you provide each week - long may you continue!
Best wishes, Glen
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Published on 2 months, 2 weeks ago