Host: Hello and welcome. Jason and Anne are just settling in ready to take your questions.

13:02 Jason Witcombe & Anne Young:
Jason: Hi everyone

Anne: Lets get chatting!
AJ: What are the thresholds

13:04 Jason Witcombe & Anne Young:
Anne: What is known as the nil rate band is £300,000 for 2007/08. If your total estate is less than this figure then it will have no IHT (inheritance tax)to pay on your death. This nil rate band goes up to £312,000 in 2008/09, to £325,000 in 2009/10 and to £350,000 in 2010/11. And hopefully even higher in the future.
Gina: my mother is downsizing her property. She will have about 400,00 left what can we do with that amount of money?

13:06 Jason Witcombe & Anne Young:
Jason: It really depends on what her objectives are. If she has an inheritance tax problem, she could consider gifting some of this amount to the next generation but if not, she could simply invest this according to her attitude to risk and income requirements.
Stephen: What is inheritance tax and how does it affect me?

13:06 Jason Witcombe & Anne Young:
Anne: Inheritance tax (IHT) is primarily a tax that is levied on your estate when you die. If you are domiciled in the UK then you are assessable to UK IHT on all your worldwide assets. There are two rates of IHT on death. 0% on the first £300,000 currently. This is known as the nil rate band (NRB) and 40% on anything over that amount. This NRB should increase over the years.
isobel b: what can my father in law do to reduce the iht as his house is worth £400000 plus investments of about £100000. he is 84 now!

13:08 Jason Witcombe & Anne Young:
Anne: His estate is therefore £500,000. With a nil rate band of £300,000 in 2007/08, this would mean an IHT liability of £80,000 (40% x (£500,000 - £300,000)). The problem is his age. Hopefully he will live for many more years but for most IHT planning you need to survive at least 7 years to get any benefit.
•He could consider taking equity out of his house and use it to do some IHT planning. However, he needs to bear in mind the costs involved in such a scheme and make sure that he is happy with balancing the upsides and downsides.
•With his available cash he could give it away and hope to survive 7 years. However, can he afford to give it away? He may be relying on it to live.
•With his available cash he could give it away but keep a regular monthly/yearly stream of cash for himself. Again, he needs to survive 7 years for maximum benefits and would he be happy with that?
•With his available cash he could lend money to a trust. This way he keeps access to his cash and only gives away the growth. It effectively freezes his assets.
•He could buy AIM shares or buy into an AIM plan. With these he only needs to survive 2 years but these kind of investments tend to be a bit risky.
•And always consider using his £3,000 annual exemption and consider giving away his excess income on a regular basis. Both these types of gift are exempt. As would be an unlimited number of gifts of £250 each to a different person – and not the same person you gave the £3,000 to.
•All in all best to talk to a Financial Adviser and look at what works best for your father.
Des King: Do I really have to pay an independent adviser £180/hr to compose a will to avoid IHT or can i do it myself?

13:08 Jason Witcombe & Anne Young:
Jason: Writing your wills in an IHT-efficient manner can currently save you £120,000 of IHT. This is by far and away the easiest and cheapest way of reducing your liability. It is quite possible to write IHT-efficient wills for under £500 and therefore this is a very small cost to pay for the benefits.
Geoff : I have property portfolio of 9 properties in joint names with my wife. How can avoid IHT when we leave it to our three sons? Net Value £1m +

13:10 Jason Witcombe & Anne Young:
Jason: There are many ways to minimise IHT and the most appropriate depends on your age, your health, your income requirements from the investments and so on. If you propose to keep all nine properties, then your best bet would be to speak to a solicitor in the first instance as there may be something that you can do surrounding the ownership of the properties, perhaps setting up a company for example.

Anne: Well you have an IHT problem in that each of you has assets of at least £500,000. And indeed if these properties are held as what is known as joint tenants then ownership will automatically pass to the survivor on first death. You therefore might want to change the ownership of some properties to tenants in common.
You need to make sure that each of you has arranged your wills to use the nil rate band on first death. This means passing £300,000 (2007/08 figure) to beneficiaries other than the surviving spouse on first death. This legacy can be absolute or, possibly even better, into a trust.
You might think about giving some of the properties away while you are alive but that could trigger a CGT charge on the gift. The use of trusts can mean any CGT can be held over however. All in all it sounds as though your affairs are quite complex – possibly too much so to discuss here. Strongly suggest you see a Financial Adviser.
John Barnes: Hello
My mum passed away in march o5 and due to a dispute we havent got probate yet although the will is valid.
anyway mum and dad had joint accounts up until the summer of 01 when a gift was made to me and the money was held in three named joint account. Now dad died in november 01 and mum and myself used the accounts as joint changing them to follow higher intrest rates. Now mums died and the house is worth a bit less than the nil rate band. The joint monies were about 80k above this am i right to assume half of this will be liable to this blessed IHT?


13:11 Jason Witcombe & Anne Young:
Anne: Going back to your father, it is possible that because all the funds paid into the joint account came from him that the whole account was taken into account by HMRC at the time of his death. The fact that half went to a surviving spouse would make that element exempt but the half that passed to you should probably have been included in his chargeable estate.
For the past few years the money was held in a joint account with you and your mother. I think that half ( £40,000) would be included in your mother’s estate on her death so there could be IHT to pay as most of the NRB is already taken up by the value of the house.
Jim: Ok, simple one to start. If my parents die and I inherit their house, what am i immediately obliged to pay in taxes?

13:12 Jason Witcombe & Anne Young:
Anne: If one of your parents dies and on this death leaves everything to the survivor, then no IHT will generally be payable as gifts between spouses are exempt. However when the survivor dies IHT will be payable on the estate. No IHT is paid on the nil rate band (NRB) currently £300,000 but the balance of the estate will suffer tax at 40%. Generally, this tax will have to be paid before the estate can be finalised although tax levied on property can be paid in ten equal installments.
Stephen : can I give half of my house to my wife (it is currently in my name only), so that on my death my half can be left to the children and the remainder inherited by them on the death of my wife? If this is possible will my children be liable to any assessment on a rentable proportion of the house until both my wife and I are gone?
Thirdly would my wife be able to sell the house at a later date should she wish to downsize


13:13 Jason Witcombe & Anne Young:
Jason: You should speak to a solicitor about this as inheritance tax planning using the main residence can be quite difficult.
I can’t see any reason why you couldn’t give half of your house to your wife.
The person most likely to suffer from any “assessment” would be the surviving spouse as by living in it they would be receiving the benefit of 100% of the house when only owning 50% of it.
Finally, your wife might be able to sell the house but if she only owns 50% of it, she would need the agreement of the other owners. What if the children wanted to sell their 50% though? What if one of your children were to get divorced and their ex-partner wanted to sell their share in the property? This could force a sale against the surviving spouse’s wishes.
Jocelyn Goodman: Please clarify a family discussion point. If a person has a great deal less than £300000 in total assests and savings, is the limit to give a maximum £3000 per year away tax free still apply, or can they give anyamount as it is not taxable even if they die within the 7 year period for IHT?

13:14 Jason Witcombe & Anne Young:
Anne: The amount that can be given away on an annual basis without any IHT implications is £3,000. This is known as the annual exemption. There are other exemptions available such as being able to give away excess income on a regular basis.
Any absolute gift, on top of these exempt gifts, to someone else that is not exempt is called a potentially exempt transfer (a PET) and it becomes exempt if the donor survives 7 years. If he/she dies during that time it becomes chargeable and is added to the balance of the donor/s estate on death to see if there is any IHT payable. In your circumstances it looks like there would be no IHT payable anyway even if the donor died within the 7 years as the estate is less than the nil rate band (currently £300,000). However bear in mind that this may not always be the case. Assets can sometime grow at a greater rate than the nil rate band over the years.
m. findlay: as a number of developed countries have zero IHT and it has been mooted as a possibility here could a lot of expensive planning to avoid IHT be wasted if the rate was either dropped or drastically reduced?

13:15 Jason Witcombe & Anne Young:
Jason: That's a very good question and is something that has been in the press a lot recently. The starting point is to look at the current rules and not to assume that IHT will be scrapped, but what this does highlight is the need to be flexible in your IHT planning. The best solution is likely to be a combination of a number of measures for most people. If you have any concerns about the rules changing you need to be careful about setting up a scheme that can't be undone.
Susan: I have been advised to set up a discretionary trust as part of our wills. My concern is the cost of running and adminstering the trust, one it is in the hands of solicitors will there costs not be as much as 40% tax?

13:16 Jason Witcombe & Anne Young:
Jason: For your own peace of mind you should ask your solicitors what their experience in dealing with this type of matter – how long such trusts tend to run for, what is the cost etc? However, the maximum IHT saving by using nil rate band discretionary trusts is currently £120,000 (i.e. 40% of £300,000) so such trusts are usually well worth doing.
Andrew Gough: My common law wife and myself have made mirror type wills and have been advised to split our investments equally between ouirselves to mitigate I.H.T is this coorrect.We are classed as joints tenants as per our willls in order that the surviving partner receives the other half of the estate,is this correct.Our respective children will receive equal portions,upon the death of both of us.Should a trust be set up to effect this,please advise.

13:17 Jason Witcombe & Anne Young:
Anne: Unfortunately, UK IHT legislation doesn't recognise common-law marriages. If one of you pre-deceases the other, then you will not be entitled to the spouse-to-spouse exemption. IHT could therefore be payable both when the first of you dies, and again on second death. What can I advise? Perhaps you should get married!
Tom : ive just inheritated a house from my grandmother and want to sell the house as i cannot afford to run it i have just been told if i do sell it i have to ay a percentage to inheritance tax is this true?? if so is there any way i can avoid it

13:18 Jason Witcombe & Anne Young:
Anne: Your grandmother’s estate would have been assessable to IHT if it was worth more than the nil rate band in the year of her death. Unless your legacy was left to you ‘free of tax’ then your legacy will have to bear a share of that tax. Because your legacy is a building this tax can be paid in 10 equal instalments. However, if the property is sold then all the outstanding tax is then payable.
You should speak to the solicitor who dealt with winding up your grandmother’s estate to talk the position over with you.
Angela Godfrey: I am divorced and living with an adult single daughter in my house which I own outright. I also have a married son. Neither child can afford to buy their own property as they would not be able to obtain sufficient mortgage even if I helped with deposit. I have no grandchildren. My total estate is at present worth about £430,000. I only have about £5,000 a year income and no life insurance. What is the best way of minimising my IHT liability?

13:19 Jason Witcombe & Anne Young:
Jason: It really depends how old you are and how important minimising inheritance tax is to you. Your current estate is over the inheritance tax threshold but as your income is only £5,000 per annum, I would assume that you are eating into your assets on an annual basis. Therefore, it may be that over the course of time your estate falls below the threshold anyway.
Susanne: Both parents have died recently and we are currently applying for probate. Estate is approx £235k so would we be liable to IHT? Thanks

13:20 Jason Witcombe & Anne Young:
Jason: Based on the figure you have given, the estate shouldn’t be liable to IHT as the current threshold is £300,000. However, the position could change if your parents had made any substantial gifts in the last seven years.
Tom: We have a 7 year old daughter. If we died we would have a significant IHT liability. Is it possible to write a will in the event of one of us dying to allow our daughter to recieve the tax exempt level and the surviving spouse to recieve the remaining estate. Can the amount recieved by our daughter be held in trust managed by the survivng spouse as a sole trustee?

13:21 Jason Witcombe & Anne Young:
Jason: This is a situation that advisors are often faced with. The first port of call is to speak to a good solicitor who will be able to write your wills in an IHT-efficient manner but will also be able to advise you on the management of trusts, if this were to become relevant. As mentioned previously, writing IHT-efficient wills can save up to £120,000 in IHT on second death.

Anne: It does make sense to leave the legacy to the daughter in a trust, rather than absolutely. This trust can leave it up to the trustees to decide when your daughter actually benefits, or you can name a specific age. You should talk it over with your spouse and solicitor, who will be able to draft a trust in your will that meets your needs.
Suresh P: I did my will recently and was told by my solicitor that it was not worth planning for Inheritance Tax although the value of my assets is approx 320000. Main reason for this was that the rules on Discretionary Trusts had recently changed, and that the IHT threshold was due to change in Mar 2008

13:23 Jason Witcombe & Anne Young:
Jason: As Anne mentioned previously, the tax threshold is due to rise to £312,000 in 2008, then to £325,000 in 2009 and £350,000 in 2010. It therefore depends how quickly you feel that your assets might rise during that time frame.
Susan Ward: Hello Anne
If one was born in the UK,hasn't lived there for 50 years but receives a pension and pays income tax under a double taxation agreement on investments there, would they be classed as domiciled for IHT ?
Thank you


13:24 Jason Witcombe & Anne Young:
Anne: Domicile is a tricky one and you probably need to go to HMRC for a definitive answer. However, it sounds to me as although the UK is your domicile of origin, you have adopted a domicile of choice in your new country of residence. You should therefore only be assessable to UK IHT on assets situated in the UK. Find out as well about taxes in your new country of domicile. Perhaps there aren’t any. Lucky you.
There is some good info about domicile from HMRC on http://www.hmrc.gov.uk/cto/customerguide/page20.htm.

You can put in a claim to be non UK domiciled using form Dom1. You can get this form on http://www.hmrc.gov.uk/cnr/p86_dom1.htm
Karl B: The Conservatives policy seems to promise dramatic change to IHT but how likely is it that they will be voted in. How do you feel that affects IHT Planning

13:24 Jason Witcombe & Anne Young:
Anne: This is not actually current Conservative Party policy but has been suggested by a study group. Whether it is picked up is another matter, though it sounds to me as though it might be a vote-winner should it be adopted. However, it has not been suggested in isolation - the pay-off is that capital gains tax (CGT) might be payable on death. They'll probably get 'their' money one way or another!
Wendy: I am single with no children. Please tell me in what ways can I avoid inheritance tax. It seems that single people always have the rough edge, never 'special offers', discounts, etc.

13:27 Jason Witcombe & Anne Young:
Jason: Marry Anne!

Anne: Sure thing! I will spend all your money and you will no longer have any IHT problem to worry about!

Jason: In all seriousness, you need to weigh up the importance of maintaining your own standard of living against leaving an inheritance friends or your wider family.
Pete Robinson: My late father's house was valued for probate purposes and I paid the necessary IHT.If I sell it at a higher price,will I be able to offset any expenses to mitigate further IHT?I am thinking particularly of a mortgage which I am still paying and other costs I am incurring to maintain it.

13:32 Jason Witcombe & Anne Young:
Anne: You would be deemed to have inherited your father's house at the probate value. I assume that you are not using this house as your main residence, so if you were to sell it then it is capital gains tax (CGT) that will apply, however you can offset capital expenses you have incurred against the gross profit you make on the sale of the house. This could potentially reduce the CGT payable. As regards IHT, if there is a mortgage on this house, then it is the net value of the house that is included in your estate and you need to take this net value into account when assessing your own future potential IHT liability.
Sally: Sadly the old folks of today really have no understanding and believe their wealth will just automatically be passed on to family, IHT is beyond many peoples understanding let alone our elderely, how do we try and help them understand the necessity of making plans without worrying them or making them feel under pressure.

13:39 Jason Witcombe & Anne Young:
Jason: It's a very good question. IHT planning can be as simple or as complicated as you or - for that matter - your advisor want to make it. We often recommend that parents involve their adult children in these discussions so that all parties are aware and at ease with the planning opportunities that might be available. It's always a difficult subject to bring up at the dinner table, but the alternative is to do nothing and possibly pay 40% IHT which is in no-one's best interest apart from the government's. By discussing this openly with a financial planner you will receive an independent viewpoint on your situation. If you need to find an independent financial adviser in your area visit the www.unbiased.co.uk website.
Katerina: My parents are aware that they can make gifts and live for a further 7 years before that gift escapes inheritance tax. My parents have flats that they rent out and my dad plans to give me one of the flats for my 30th birthday. The flat he has in mind is valued in the region of £100000. Is it as easy as that?

13:42 Jason Witcombe & Anne Young:
Jason: As long as your father won't still be benefitting from that flat after he's gifted it to you then there shouldn't be no problem. If your father were still receiving the rent then this would seem like a 'gift with reservation'.
Nick Randerson: I have 3 properties worth nearly £1million. 2 are owned jointly with my wife and one owned jointly with our 2 teenage sons. Can I reduce our IHT liability by putting our son's names on the other 2 properties.

13:43 Jason Witcombe & Anne Young:
Anne: Making gifts is always a good way of potentially saving IHT - remember you always have to survive seven years in order that a lifetime gift falls 'out of account' for IHT. The problem with making gifts however is that they may be treated as a 'disposal' for capital gains tax (CGT). Putting the children's names on the property would be treated as a gift to them and so CGT could be payable. The worst scenario is of course that by making this gift you trigger a CGT charge and then don't survive the seven years enabling the gift to fall 'out of account' for IHT. Please take advice before you go down this route.
Louise: My mother-in-law had asked me about IHT planning and I suggested she and my father-in-law could change their home to tenants in common and each leave their their share of the family home in trust for their 3 sons. Unfortunately my mother-in-law died in Oct 07 before this was done. Could my father-in-law action this now through a deed of variation?

13:45 Jason Witcombe & Anne Young:
Anne: I shall presume you mean October 06 re your mother...and that your parents owned their house as joint tenants. The good news is that this method of owning the house can actually be changed to tenants-in-common using a deed of variation. You should consult your solicitor to get this drafted.
Nicola Jane: My mum and dad have yet to think about what Inheritance Tax will mean for myself and my brother. What would you say are the first steps they should be taking to protect their estate from the tax man?

13:45 Jason Witcombe & Anne Young:
Jason: I know this sounds simple but the first step should be for them to calculate the value of their estate. This will give them a good indication of what they're potential IHT liability would be. If they find that they have a substantial liability and are concerned about this they should seek independent financial advice. There are a variety of different solutions and the most appropriate course of action will depend on their personal circumstances and objectives.
John wallis: Can one offset potential IHT by bequeathing some of it to a recognisable charity such as cancer relief

13:47 Jason Witcombe & Anne Young:
Anne: Various legacies are exempt for IHT purposes. One way of making an exempt legacy is by leaving money to a charity. As an aside, you might it interesting that legacies to political party are also exempt for IHT. Funny that!
Richard: If only one parent remains alive and having given the £3000 per year and hoping for seven years to pass after passing on a percentage of funds. Apart from investing AIM companies what else can one do?

13:51 Jason Witcombe & Anne Young:
Jason: There are all sorts of ways of mitigating IHT. As only one parent is alive, writing an IHT-efficient will no longer an option on the assumption that over two years have passed since first death and that a deed of variation is no longer an option. There are still many alternatives. For example, whole of life insurance written in trust, investment related schemes such as discounted gift trusts and loan trusts, and also the unlisted company exemption that you have referred to. One area, however, that often gets overlooked is the opportunity to make gifts out of normal expenditure which are free of IHT. If your parent has excess income, then that could be an opportunity.
andrew marsh: can you live in your parents house, be gifted half their house, pay half the bills, and avoid iht on the whole or only your half ?

13:53 Jason Witcombe & Anne Young:
Jason: Anyone wishing to undertake IHT planning involving the main residents should speak to a good solicitor. There are many pitfalls and I would treat such planning as last resort and work on the assumption that it might not work.
Nigel: My dad passed away in March this year his estate being worth approximaetly £610000. His estate is nearly settled. My question is that he invested over £30000 over the last five years for his three grandchildren.They are invested in Hargreaves Landdown bare trusts. Are these trusts IHT exempt?

13:54 Jason Witcombe & Anne Young:
Anne: Part of the gift that your father made five years ago may have been exempt. An exemption that might have applied was the annual exemption of £3000. However, the balance of this gift (possibly £27,000) will have been treated as what is known as a potentially exempt transfer (PET). This means that if he had survived seven years from the time of the gift it would have fallen out of account for IHT purposes. Unfortunately, your father died after only five years, and this means that it will be taken into account when assessing the IHT payable on his death. Effectively, the non-exempt element of the gift will use up a bit of his nil rate band leaving less to be set against the balance of his estate.
Daphne Massey: How detailed do records of gifts have to be i.e. would a bank statement do or does there have to be a signed document saying the gift has been made?

13:56 Jason Witcombe & Anne Young:
Jason: What you need to bare in mind is that if you have a number of bank accounts, there will be an enormous amount of paperwork to look through at what is likely to be a stressful time for your family and executors. The more accurate records that you can leave about gifts, the easier it will be for them. Perhaps a short letter each time you make a gift would work for you. Make sure you leave this somewhere suitable, such as with your will.
Susan S: As my friend's parents both suffer from dementia then she has gained POA and is currently splitting up their savings amongst her family so that their savings are below the minimum of £16k in order to receive as much NHS care provisions as possible! Their home is still in there names & so keeping in mind their mental health, is it now too late to put the house into their daughters name (only child).

13:57 Jason Witcombe & Anne Young:
Anne: You need to be very careful in doing any IHT planning as an attorney. This is because the power of attorney (POA) may not give you the power to make gifts. You should check with your solicitor whether you have this power. It may still be possible to make gifts but it may be necessary to get the appopriate permission from the Court of Protection, and a solicitor should be able to help with this too.
John Wallis: Thank you. How would I find out which charity would be exempt IHT?

13:59 Jason Witcombe & Anne Young:
Anne: Any organisation or trust set up for charitable purposes should be eligible, but the regulations exclude foreign charities. Your solicitor should be able to guide you.
Martin Rands: By way of an example, if two elderley parents had assets of £600,000 and wanted to minimise IHT, should they gift say £300,000 now making it a PET. Or should they split their assets and leave say £300,000 to their children on the first death. Or just leave the assets to the partner as the will can be modified within two years of death (by agreement) Many thanks

14:00 Jason Witcombe & Anne Young:
Jason: There is no guarantee that deeds of variation will be available in the future and so I wouldn't rely on this as a solution. In addition, if there are a number of beneficiaries it may be difficult and very time consuming to get them to all agree to the proposed changes.
Chris Hall: Please can you explain the benefits and drawbacks of the Discounted Gift Scheme?

14:06 Jason Witcombe & Anne Young:
Anne: This is a scheme which allows you to give capital away but retain for yourself a regular stream of money for life. If you survive seven years from setting up such a scheme, the gifted amount will fall out of account - and the bonus is that the amount you are treated as having gifted away is not the amount you have invested in the scheme. This is because you have kept this stream of money for yourself. For example, if you invested £100,000 in one of these schemes, and retained for yourself £5,000 a year for life, you might be treated as only having gifted £60,000. So if you died within seven years of setting up the scheme, only £60,000 would be assessed for IHT. Things you need to be careful about are that in setting up this scheme you can never touch your original capital of £100,000. All you can ever get back is your £5,000 a year - or whatever figure is appropriate in your circumstances - for life. As a general rule, you will also need to undergo some medical assessments in order for the insurance company to estimate the discount in the plan. You need to think very seriously if you are happy with these potential drawbacks. However, these are very nice IHT plans should you feel happy to go ahead.
Chris Lloyd: My father is 89, in very poor health, has a house valued around £350K and savings of £180K, which he is worried he may need for long-term care. He is very closed-minded about doing anything on Inheritance Tax but at the same time gets extremely angry with Gordon Brown about it and takes the attitude it is up to Gordon Brown to do away with it. My father pays the £3K annual IHT gift to myself and my sister. I read that there are moves that can be taken to slash IHT immediately. Is this right? It is unlikely he will survive a further seven years

14:08 Jason Witcombe & Anne Young:
Jason: The older you get - and although this doesn’t always go hand in hand - the less healthy you get, the more your options are limited. This is why it is so important to start IHT planning as early as possible. If your father is very closed-minded about IHT, you need to weigh up whether bringing this to the table will harm your relationship with him in his later years. Some of the schemes that are available to him (such as buying a portfolio of AIM shares) involve lots of investment risk which might not be appropriate if his savings are required to pay nursing home fees.
Host: Unfortunately that is all the time we have today. Many thanks for all your questions.

14:12 Jason Witcombe & Anne Young:
Anne: Thank you for all your questions. I am sorry that we have not been able to answer them all, but I do hope we have been able to give many of you some good general background on IHT and some ideas on areas you could follow up with your financial and/or legal advisers. You can find lots of further information on www.leavemore.com.

Jason: In my view, the key to IHT planning is to start early and to not put all of your eggs in one basket. If you would like to contact an independent financial advisor then do visit the www.unbiased.co.uk website to find a selection in your area and to suit your needs. If you would like to send me a question that hasn't been answered you can do via the Evolve website at www.evolvefp.com. Thanks everyone for your questions.