Hi Experts, I am in my 80’s and have a large ISA portfolio which I do not need for personal use. However my two adult children have only small pension provision. Apart from withdrawing the balance and giving away now are there any other strategies I could use. I have had cancer and am clear now but am warned it is the type that can recur.
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I’m no expert, but as no one else has responded let me throw in my 0.02 worth. I know nothing about ISA. But here goes.
The biggest tax loophole out there is stepped up basis. The cost basis of your assets when your heirs inherit is stepped up to market value on your date of death. This means they pay no income taxes on the gains during your lifetime. Letting them inherit is probably the best you can do.
The federal estate tax exemption stands at $12MM. Big enough for most of us. Over that the tax rate starts at 40%. Something to keep an eye on. And note that that law expires in 2025. Then it reverts to a lower number. Unless Congress takes action. Will tax law be an issue in the 2024 elections? If your estate approaches those numbers, it’s worth your while to consult a professional adviser for assistance.
Be aware that some states also have inheritance taxes.
Under current law you can gift up to $16K per year to each individual without paying gift taxes. If you gift assets like stocks, they get your cost basis and have to pay taxes on gains when they sell. You have the option to sell the stock and gift the proceeds. Then you pay the income tax. Which is better in your case?
Probate can be expensive some places. Living trusts are sometimes used to keep estate records private and avoid probate. TOD, transfer on death, is another way to avoid probate. Most states allow TOD on real estate and even assets like cars.
Looks like you’re in the UK. This is predominantly a USA investing site. A better place to ask your question would be on the site where all the former Motley Fool UK folks went after the uk site was shut down, here:
ISAs will be liquidated and count towards your estate for IHT.
IHT is payable at 40% for estates over 325K.
Thank you for the info Adrian - I didn’t realize it had changed.
Thanks for reply Paul - but I am in the UK - your system sounds very like our though
Yes, except for the estate tax: $12 million USA versus #325k single/#650k couple UK!
Dealing with it right now…interestingly, even though my mother passed away nearly 40 years ago, because my father never remarried his estate gets to use both their exemptions, and so only pays IHT above #650k.
Still a big chunk, and apparently, we (the beneficiaries) have to pay it BEFORE any money can be taken from the estate.