Wealth Check: 'Will inheritance tax ruin my retirement?'
Saturday 09 February 2008
Margaret Wylie, 59, from Stirling, is on the brink of retiring from her job as the deputy head teacher of a primary school. But with less than a year to go until she finishes work, she is more worried about her parents' money than her own: "My parents live in sheltered accommodation with few costs, and I manage their money as best I can," she says.
With a modest pension, no debts, and no mortgage, Margaret's other concern is how to limit the inheritance tax bill for all three generations of her family, including her two grown-up children. "I want to know how to make sure my parents, myself and my husband can enjoy retirement without my children losing any of their inheritance to the taxman," she says.
Three independent financial advisers offered Margaret advice: Keith Churchouse of Churchouse Financial Planning, Ajmer Somal of Positive Solutions, and Martin Bamford of Informed Choice.
Margaret Wylie, 59, deputy head teacher, Stirling
Monthly spending: £1,500 joint total
Pension: £9,680 contributions per year
The advisers recommend that Margaret should find out how much she will receive on retirement at age 60. "She will probably receive around £10,000 a year in pension income from her private scheme," says Martin Bamford. "Then she should check her state pension with the Pension Service ( www.thepensionservice.gov.uk) to find out how much she is due to receive." After 20 years of contributions, Margaret's Scottish teachers' pension will also pay her a lump sum of around £29,000, and this must figure in her savings plan in the future, say the advisers.
Inheritance tax (IHT)
With an ageing population, more and more of us will find ourselves in the same situation as Margaret, retiring with dependent parents. "As her parents have very modest expenditure requirements, this is possibly less of an issue than it could be for other people," says Bamford.
Before she does anything else, Margaret should check what her IHT liability and that of her parents will currently be. "Those with assets under £312,000 after April 2008 will not have to pay IHT tax on their estates," Keith Churchouse says, "and if passing your money to your spouse, it can be up to £600,000." When the remaining partner dies, and their remaining assets are passed on, the IHT liability kicks in only after the £600,000.
"If Margaret's parents' estate is worth less than this, they have nothing to worry about," adds Ajmer Somal. "If not they should use their annual exempt gift allowance of £3,000 each."
Savings & investments
With Margaret's pension lump sum due at the end of the year, when she retires, the advisers believe cash investments could be the best option, given her cautious attitude to investing.
The advisers suggest that Margaret and her husband may wish to place £7,000 each into a Maxi Stocks and Shares ISAs next tax year. After April 2008, they can each place a further £7,200 into an ISA.
To find an independent financial adviser in your area, visit www.unbiased.co.uk
For a free financial check-up, write to Wealth Check, The Independent, 191 Marsh Wall, London E14 9RS or email email@example.com
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Justin Bieber was one of the hardest hit
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Shock poll shows voters believe Ukip is to the left of the Tories
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
Sony hack: Angelina Jolie branded 'seriously out of her mind' in further embarrassing leaked email saga
iJobs Money & Business
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...
£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens