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Yoss

Family Bank

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DO families really distrust each other so much these days that grand parents accept 2.5% return on (Taxable) savings.

While Grandchildren pay 4.39% to the same bank to borrow.

assume I had a £100,000 mortgage and Nan had £30,000 in savings + a £500,000K estate (I wish but...stick with me)

Now I go out and get an offset mortgage for £100,000K,

Nan clears £30,000 (With access to the account, so she can get money back at the drop of a hat)

So now I am paying 4.39% on £70K

and by the tax free back door, I am paying nan 3.5% on £30K cash in hand a month for everyday living expenses.

7 Years down the line, nan dies.... That £30K is exempt from inheritance tax. KERCHING! Nan got a better return on savings, I got a lower interest rate, and when she starts pushing up daisy's we save 40% from said tax man.

Sure this does require trust, but much less trust than what people put in bankers/tax payers and who better to judge if you are a worthy investment!

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...

Now I go out and get an offset mortgage for £100,000K,

Nan clears £30,000 (With access to the account, so she can get money back at the drop of a hat)

So now I am paying 4.39% on £70K

and by the tax free back door, I am paying nan 3.5% on £30K cash in hand a month for everyday living expenses.

7 Years down the line, nan dies.... That £30K is exempt from inheritance tax. KERCHING!...

I think that if the £30k is exempt from inheritance tax, then it is liable for gift tax. If you try having it both ways, that would be tax evasion, I think. [i am not a tax lawyer]

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You assume that contemporary Britain still operates with morality, honour, and family.

You are wrong. Even a little bit of money borrowed between family members has set off a huge number of intergenerational rows, what with jealous siblings etc...

Nope, this is one of the reasons banks were invented.

Edited by cashinmattress

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I think this was discussed here a few weeks back, seems like a no-brainer. Although I fundamentally disagree with usury, if it stays out of the real usurers hands its got to be a good thing.

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I think that if the £30k is exempt from inheritance tax, then it is liable for gift tax. If you try having it both ways, that would be tax evasion, I think. [i am not a tax lawyer]

Nope you can give whatever you like away to people as long as you live for 7 years after the gift. Hence the specific reference to a 7 Year cut off!

It does involve Tax evasion on a basic cash in hand level... But given they only catch benefit cheats that appear on reality TV shows, do you really think they could catch up with nan getting her food paid for from my spare cash card?

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Nope you can give whatever you like away to people as long as you live for 7 years after the gift. Hence the specific reference to a 7 Year cut off!

It does involve Tax evasion on a basic cash in hand level... But given they only catch benefit cheats that appear on reality TV shows, do you really think they could catch up with nan getting her food paid for from my spare cash card?

Fair enough. Nan needs to transfer it as a gift at the outset then. This effectively denies her a claim on the money. They might not catch up with Nan on your spare cash card, but if Nan went gaga and mislaid the card, the wrong person could get their groceries at your expense.

The principle is OK enough, but the working is not so good.

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I think that if the £30k is exempt from inheritance tax, then it is liable for gift tax. If you try having it both ways, that would be tax evasion, I think. [i am not a tax lawyer]

no gift tax on cash gifts (can be cgt on other gifts)

only have iht if donor dies within 7 years of gift and even then if live more than 4 years its tapered down.

re: food gifts - regular gifts from income like food bill (rather than capital) not subject to iht.

my grandma gave me money towards deposit in 1997, she lived more than 7 years so no IHT was ever due.

on the subject of the original post, i don't think families would really trust each other enough. sad but true.

Edited by grizzly bear

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