Q. I recently inherited £100,000 from my late aunt. This is money I do not particularly need, and potentially adds to my own estate for inheritance tax. My two children are both in their twenties and struggling to get onto the housing ladder. What is the best way to give the money to them?
A. A deed of variation of your Aunt’s will, or of the rules of intestacy, can be used to re-direct a legacy that is not required. Provided the deed is executed within two years of your aunt’s death, and quotes s142 of the Inheritance Tax Act 1984 and s62 of the Taxation of Chargeable Gains Act 1992, then for the sake of Inheritance Tax and Capital Gains tax, the gift will be treated as though your aunt left the money directly to your children. Please note, however, that if you are subsequently assessed for your ability to pay care costs, the assessment will still take account of the fact that you gave this money away, and this could affect the amount the local authority contributes to your care. If you have other funds available, or if the assessment is in many years time, this may be less relevant. The government is currently conducting a review of the legislation surrounding the ability to vary a will in this way, with further announcements expected in the autumn.
Q. I have quite a few debts which are mainly credit card related and causing me some problems. I am struggling to cope. I have read that debt management companies can provide an individual voluntary arrangement to get rid of most of the debt. Does this work?
A. An individual voluntary arrangement (IVA) is a formal arrangement between you and your creditors. Effectively you come to an agreement to pay them something you can afford over a period of time and they should freeze interest payments and debt charges. After a period of time, typically 5 years, your debt can be deemed as settled.
Having an IVA will make it difficult to obtain mortgages and credit in the future and rather than using a debt management company I would suggest that you contact National Debt Line on 0808 8084000 which is a debt charity free helpline.
If you have a question you would like Trevor to answer, please email it to: yourmoney@rwpfg.co.uk or post it to Your Money, Rutherford Wilkinson Ltd, Northumbria House, 21-23 Brenkley Way, Blezard Business Park, Newcastle upon Tyne, NE13 6DS.
0191 217 3340
