inheritance tax

[Chucklebutt]

my mother is very ill and unlikely to live much longer. she has some savings but less than �100,000, part of which we intend using to pay my sister to be a full time carer.

Her house is probably worth about �350,000 and she also has some jewellery and other personal possessions, but not of any substantial value.

How can we legally avoid paying 40% to the taxman when she dies?

Can we legally transfer her money to an offshore banking account (eg Channel Islands, Isle of Man, Gibraltar, Caymans etc)?

Thank you for your help.

[khana]

Had you looked in to your mother setting up a trust ?, I believe that if done correctly it will minimise any taxes due.

Best bet is to speak to an independant financial advisor I would think.

[spudqueen]

My family was in this position just over a year ago when my mother died just 2 months after being diagnosed with cancer. At such a late stage in someones life I think that there is very little you can do to avoid paying the tax, but please note that the 40 per cent only applies to anything OVER the inheritance tax threshold (about �260,000), not on the whole estate. I just looked on it as money owed by my mother, not myself as her house had appreciated in value an awful lot over the past few years and if it wasn't for that we wouldn't have the money we have got now!

I personally think that it's not worth trying to defraud the tax man (they do check these things you know) and just pay the tax and be grateful for what you're left with. It usually serves as a good reminder to other people though, after my mothers death my in-laws have had a good rethink about their finances.

[Sweet G]

Speak to IFA or a solicitor who specialises in Estate Planning. The current IHT threshold is �275,000, the value of the estate over that is taxed at 40%. Trusts could mitigate the tax but they must be done by a specialist as the revenue are currently targeting IHT avoidance trusts. Every person has IHT exemptions: 1x �3,000 gift per tax year which can be carried back to the previous year if unused and unlimited gifts of �250 per donee. Gifts that fall outisde the exemptions are Potentially Exempt Transfers (PETs)and the donor must live for 7 yrs after the gift is made for it to be exempt and thus IHT free. A simple solution is to effect a life insurance policy designed to pay out, on death, the approximate amount owed in IHT on the estate. An IFA will tell you how best to structure this. NB if you dont have the cash to pay the tax you may have to sell the house to do so.