Real interesting thread - best I have seen in a while.
Myself and 6 siblings and cousins did the gifting route for an elderly bachelor uncle about 20 years ago at my insistence (otherwise the cousins would have got the whole house themselves) and my uncle's sense of fair play that came from living through the 1930s and being present at D-Day. We paid no tax due to the time elapsed and he lived there rent free no questions asked. i only wished I had done it for my parents as well but their house is only a fraction of their total wealth.
Back to pensions and the state makes a cruel and dispassionate calculus in determining the ages at which they kick in. When the state pension in the UK came in supposedly the average life expectancy for a man was 66 so on average you only got one year of it. For women who were considered to be more needing once the husband had died the state was more understanding and paid it from age 60. However there is the case of women not working enough to have accumulated enough NI payments.
What Australia does for state pensions is make them asset tested. Any more than $800k of assets (including the primary residence) and it is chopped back gradually. However since 1991 Australia has made employers contributions to ALL their employees superannuation schemes compulsory at 9% of salary. When people retire they gradually whittle down their accumulated fund and when it gets below $800k they start to get the state pension. If you have not saved enough in your private superannuation fund and live in a cheap house then get the full state pension from the get-go.
What New Zealand does for pensions is to have a smaller compulsory employer contribution to personal superannuations schemes. However there is a smaller state pension that is not means tested and does not depend on whether you have worked and paid NI stamps or not. Long term I don't think this is as sustainable as the Australian system but if you understand NZ it has a much more different demographic.
Very interesting subject pensions. In my view Australia has got it about right. Make the wealthier people save some money by tax incentives and compulsion then as they get into their seventies and eighties and the assets run down then the state steps in. The UK system is unsustainable and unfair.
Just been speaking to mate of mine who owns a woodland. He tells me that you can gift a woodland to offspring with zero capital gains tax if it is under the 325k threshold and capital gains tax is only on any increase in the value of the land and not on the value of the growing timber on it.
I am just wondering if you could pull a stunt whereby you sell your house to someone you know with a wood who sells you his woodland for exactly the same price. You then sell the woodland to your kids who buy it at the price you paid for it with a secured loan. They then pay it off with the cash you give them from the sale of your woods. They then sell the wood back to the man who initially owned the wood and buy your house with the proceeds of him. Again, all at the same price. This could be done all in one sitting at a table where, basically, you are shuffling deeds around in a circle and signing bits of paper for half an hour. Obviously, you'd need to know someone who owned some woodland who'd be prepared to do this with you in return for a thousand quid, say, for half an hour of their time sat around a table.
The main advantage of the above, or some variant of it, is the avoidance of paying for social care fees come the time. Which for people on modest means like me, dwarf any issues about capital gains tax.
It seems the simplest solution is simply to sell the house to my eldest at full market price and give him the cash off the books to buy it outright immediately after. Then, stay in it on a lifetime tenancy with a fixed nominal rent. This would protect us is he loses everything to creditors.
It would mean he would be liable for capital gains tax when he sold it after we were dead and, due to the less than market rent, he would not be able to claim tax allowances for repairs. But, crucially, it would mean that the state could not steal it off us if we get to a point of needing social care. The main reason being, as things stand, councils can go back in time as far as they like and, if they can prove that an asset was sold at less than market price to a relative they can make the case it was "deliberate deprivation of assets" to avoid social care costs. They are going to have a job proving that if the property was sold 20-30 years earlier and it was sold for the full market price.
Last edited by Little John on 23 Aug 2019, 16:02, edited 3 times in total.
The tax laws are to all intents and purposes written by the big accountancy firms for the government. If you can afford to go to them they will get you around all the catches that they have put in as they have also written in plenty of loopholes for their rich clients.
The source for this information is The Prostitute State by Donnachadh MacCarthy. Available from www.theprostitutestate.co.uk at £15 inc P&P
Little John wrote:Just been speaking to mate of mine who owns a woodland. He tells me that you can gift a woodland to offspring with zero capital gains tax if it is under the 325k threshold and capital gains tax is only on any increase in the value of the land and not on the value of the growing timber on it.
I took advice on this matter some years ago. I was advised that as the woodland would never have any planning permission for anything, and would only ever be useful as a source of timber, the land itself could be valued at nil, and the entire value assigned to the timber. Thus any gain in value could be entirely due to the growth of the timber.
