Avoidance of tax

[devadiva]

Man in his 90's wants to give children in their 60's �50k each - how do they avoid inheritance tax or any other tax please.

[Barmaid]

The donor needs to survive for 7 years to make the gift exempt from IHT - until then they are "potentially exempt transfers". It will only be an issue if the total estate (including the failed PETS) exceeds the nil rate band (if possible combining the spouse's nil rate band depending on when she died).

[factor-fiction]

As Barmaid says IHT only comes into play once the nil rate band is exceeded, so will be applied to anything over �312,000.
If he has a large cash fund plus a property then IHT may become an issue.

In addition to what Barmaid says, I'd point out that the man can give his sons smaller amounts spread over a number of years and these would escape IHT

[devadiva]

man y thanks for your answers - it doesn't seem simple.

[factor-fiction]

IHT threshold is actually �325000.
This will be �350,000 next tax year.
There are some simple steps you can take:
http://www.moneysavingexpert.com/protect/inher itance-tax-planning-iht

[buildersmate]

What is not simple about it?
This gentleman needs to add up roughly what his assets are worth - if more than �325k, his estate will unfortunately have to pay IHT at a rate of 40% of any excess that is over the �325k threshold.
The gentleman cannot simply give away bundles of �50k to each of his children without those gifts also being regarded as part of his estate - until a period of time of 7 years passes from the date of the gift.
However the gentleman can give away �3k in TOTAL each tax year to whoever he wishes, without it 'counting' as a Potentially Exempt Transfer.

[kinell]

as he is getting on a bit the seven year rule could be a problem,

lets assume he has 3 kids,

off they all go to a london casino, one which has sensible limits....

he puts the first 50 large down by the side of the table plus another 1500 quid...
his child takes the cash and puts 25 grand on both red and black and 700 on zero,

the child has placed the bet with money 'borrowed' from dad,

if the resulting spin is any number 1 to 36 you lose on say red but win on black,
the child has 'won' 25K and in uk there is no tax to pay on gambling winnings,

repeat and you have your 50k tax free! shame your dad played and lost,

you have a 1.35% chance of zero appearing in either of the spins so in order to not get hit for 25k on any one spin (half your stake) you can cover that with a �700 additional bet on zero (returns 25200).

you retain 48600 of the money 97.2%! or the equivalent of paying tax at 2.8%.

an actuary will reckon that is good value against the chances of a 90 year old living 7 more years,

[kinell]

i wouldnt of course recommend this course of action!

dont forget dad goes along with cash and you take your 'winnings' chips to the cash desk and get a casino cheque for them and pay it into your bank.

[Rollo]

Or leave the country for one where there is no Inheritance tax, and take all of his assets with him.

[buildersmate]

Unfortunately not easy Rollo. HMRC have a 'gotcha' for that as well - known as domicile. Have to physically move all the assets out of UK jurisdiction - not just the owner of those assets.

[devadiva]

Many thanks again for all your answers especially Factor 30- that link was written in plain english which is what I needed.

[buildersmate]

Give the man some stars then.