Inheritance tax is very fair

So it is said at least. Why should children benefit just because they won the lucky sperm club thing? And yet inheritance tax is also the most hated of all taxes:

What’s your financial priority for the years ahead?
I’d like to keep working for as long as I can, so that the wealth I accumulate can benefit my children.

Things do tend to get done to benefit children. That’s rather how the species works.

That is, those who say that inheritance tax is the best tax are those who haven’t met than many humans.

If I ran into a fortune by chance, I’d want to find a way to use it productively, and after setting some money aside for my children,

34 thoughts on “Inheritance tax is very fair”

  1. In other words, if I can’t work for the benefit of my family after I’m gone, why accumulate wealth past the time when my kids are independent?

  2. “why accumulate wealth past the time when my kids are independent?”

    Because you cannot trust politicians to keep the Social Care promises they made in order to get your vote. If you don’t have anough saved to take care of yourself, you don’t have enough saved.

  3. I have every intention of dying in abject poverty. Anything that is left goes to the Cats’ Home.
    I already live in squalor, so I am just getting some practice in at the moment.

  4. It usually goes like this, “of course people should be able to leave a reasonable amount to their children”, reasonable being defined as around the amount I might have left over.

  5. It is still theft. The government helping itself to other people’s money simply because they can. I wonder if it will make a difference to how the tax is perceived now that ordinary plebs are starting to accumulate reasonable amounts of money. My grandparents didn’t leave much behind at all. They didn’t own their houses, they had enough to get by but that was about it. My wife and I will be able to leave a house and a reasonable amount to our sproglet.

  6. Haven’t a dog in the fight (no kids). But observing friends and neighbours, life’s advantages appears to be something bequeathed via genes and the quality of education afforded children. Several hundred thousand on top is a bonus, but by the time you inherit you probably don’t need it. That’s unless we’re talking Maxwell money or similar. I wouldn’t pass up Philip Green’s yacht, for instance.

  7. My mum has been siphoning a few grand to my siblings and I in recent years. One of her ex-colleagues criticised her for avoiding tax, but, sure as eggs is eggs, now that she’s a little older, she came to my mum for advice on the best avoidance strategies.

  8. When I sold my house, I gave all the money to my son in law as an outright gift, he now owns the new house we all live in. Bollocks to the government, why should they expect my money just because I croak?

  9. Quite so, Bernie G, we’ve striven hard to maximise the advantage we could provide for our four children, spending a small fortune in the process, well north of A$100k per child. If you’ve got the money, it’s what you do. When in England, it was simple to move into the catchment of good schools (Beverley). In Australia, for the three who came with us, it was private school followed by paying for university. At least our children are grateful for the opportunities we gave them, they know that our money was hard earned.

  10. The great thing about inheritance tax is you only pay it when you are dead. Now, if only this had any impact on the government’s avarice and resulted in lower tax rates when alive…

  11. It is worth remembering S24 of IHTA, which allows regular transfers of surplus income as well as the gift allowance. It still works if only one or two such gifts are made, so long as the intention (evidenced by a letter, perhaps) is to make regular gifts.

  12. It is, as Mr Worstall notes, a hated tax, but ironically it is probably most hated by the people who have something to leave than it may be by the intended recipients. Again, taking care of one’s young even when they are of an age to take care of themselves. How do you stamp that desire out?

    It all fits into the current inequality meme that taxes are less about raising funds for government services than they are about limiting one what might have.

  13. @ TD
    Obviously you haven’t tried filling out a form to show that no IHT is payable on your mother-in-law’s “estate”. 120-odd pages, one of which required a scan through her bank statements for the last seven years so that my wife and sister-in-law, as Executors, could certify that there had been no potentially taxable gifts other than from income.
    Having witnessed this (mostly at second hand) my wife has demanded that I prepare as much as possible for my probate before I die! (I have set up an Excel file, ‘cos it’s easy to update, to show that there are no dutiable gifts in the last seven years).
    IHT is hated by most of the intended recipients, including virtually all executors: it is a form of torture which must be endured prior to the distribution of the estate in accordance with the wishes of the deceased.

  14. John77

    Dunno what the law is in Blighty, but over here in Texas we have the notion of a Trust.

    You transfer everything to your Trust, of which you are the sole Trustee. When you snuff, doesn’t matter. Wasn’t yours. Still belongs to Trust. Trust has successor Trustees appointed in advance, generally either skilled family member, or bank (or other professional). You leave instructions about what to do with the estate. It is done.

    If you are en-partnered, you set it up as joint with both of you as Trustees, with instructions that upon one shuffling off mortal coil, other runs it. You can set up distribution upon final death. Etc. You can split a joint Trust into two (so that eg wife can ensure that her kids get something even if you hate them and she dies first) and make a Trust unchangeable (so you can’t undo her wishes). Etc Etc Etc.

    It doesn’t avoid taxes. It does avoid probate. Can be excellent if one partner is unable to look after self, and the other gets brain dead, or just dead. All resources available instantly etc etc.

  15. We don’t want to give heaps of money away. Apart from the value of the house, which we could realise in part by Equity Release, we don’t have heaps. What we do have, including the value of the house, we want to safeguard for the cost of Care.

  16. @decine “Because you cannot trust politicians to keep the Social Care promises they made in order to get your vote. If you don’t have enough saved to take care of yourself, you don’t have enough saved.”

    Can you trust them to not take your savings?

  17. Since my dad passed away over £600k has come out of the money he and mum worked and saved for, along with the sale proceeds of the family home, to pay for her care in a dementia unit.

    Other elderly residents apparently have no assets and the state pays their fees. Their children, when visiting, arrive in expensive cars I can only dream of.

    IHT appears to be largely unpoliced by HMRC and a lot of people know it.

  18. Why have a Lucky Sperm Club at all? Children should be taken and raised in a creche for the greater good of the State. /S

    Once again an attack on private property. What business is it of the government to tell me whom to give my property to.

    This is naught but the old sin of coveting dressed up as ‘caring’. The ancients were wise to this, that is why two of the Ten Commandments deal with this.

  19. Bloke in North Dorset

    Slightly OT, but on the issue of wills – in the unlikely event you want to leave money to one of the big charities never leave it as a % of your estate, leave a fixed amount.

    They all have large legal departments that exist only to ensure that they get every single penny they think they are entitled to. I’ve heard more than one solicitor complain that their aggressive tactics have cost an estate money because of the time spent answering all their trivial questions and supplying paperwork.

    Plus it delays your other beneficiaries getting their due.

  20. They all have large legal departments that exist only to ensure that they get every single penny…
    Too true. In our neck of the woods, one very large charitable foundation is quite proud of itself for challenging executors for the ‘mis-handling’ of estates. We’re not talking about improper distributions or pocketing valuables – things like not getting maximum value (in their eyes) for real estate, or “imprudent investment.” Of course, in hindsight, it’s always easy to show that an investment was imprudent; not so easy looking forward.

  21. BIND & dcardno: How pleased I am that, in my will, charities get not a single penny. Of course maybe I’ll spend it all trying to keep myself alive and there’ll be nothing left for the family anyway.

  22. Dear Senior Citizen,
    Thank you for living within your means and saving
    Unfortunately the UK plc wasn’t able to do the same, so we’re taking your money
    Ed
    House of Commons
    London. SW1A 2AA

  23. Far worse than being hated is that it doesn’t raise anything – just £5bn or so. That isn’t enough to achieve anything regarding inequality and the money is insignificant.

    Along with stamp duty, it’s surprising that nobody has abolished it yet. But I suppose that would require us to have a government that actually governed.

  24. @JK277 – It’s actually worse than that. Anyone with any real wealth has asset management and tax planning on the agenda so that when the grim reaper finally calls there is nothing that is subject to inheritance tax left, all cash and assets having been moved long prior to death or into exempt trusts.

    So the only ones that it does catch are those who have wealth but are unwary (widows, lottery winners, etc.) or those who expire well before their time. Not exactly a great basis for taxation.

    It does however allow both parties to claim that “Inheritance tax only hits the wealthy”, despite the fact that most of the genuinely wealthy successfully dodge it.

    As for abolition, given that the amount raised is relatively trivial and the deadweight costs are significant, you’d think that it would be an obvious tax for abolition, but the problem is that it’s “Virtue Signalling” about reducing inequality is politically useful to both the Tories and Labour, so I can’t see it going any time soon.

  25. @ Bloke in Tejas
    We used to have trusts that avoided IHT (e.g. the Duke of Westminster is frequent alleged to be a billionnaire but in fact he isn’t because he is only entitled to the income from the Grosvenor Estate, not the capital so it isn’t liable to IHT on his death) but the government noticed and passed legislation so that no new trusts can get full exemption from IHT and recently they introduced a periodic tax on the capital of all new discretionary trusts (except those for vulnerable individuals).

  26. Slightly OT, but on the issue of wills – in the unlikely event you want to leave money to one of the big charities never leave it as a % of your estate, leave a fixed amount.

    Better still, don’t leave the avaricious bastards anything. If you wan’t to leave to charity, give to small independents.

  27. Inheritance tax has the great appeal of being on someone else. The people are all for taxes on other people.

    Longrider, I have looked for decent charities in the U.S. I have found two: The Salvation Army and local Humane Societies* (national HSUS is corrupt – sickeningly so). I have dealt with others of great fame til I discovered they were corrupt.

    “If you want to leave to charity, give to small independents.”

    This is good advice. I consider all big charities to be corrupt until proven not to be.

    *SPCAs probably good, too, but I have no direct experience.

  28. “I consider all big charities to be corrupt until proven not to be.” Same here; hell even The Lifeboats is now ruled by the woke.

    I suspect that the only national charity that retains substantial merit is on your brief list too: the Sal Dals.
    But I have a vague memory that someone here told me I was wrong on that.

    Naturally we will not contribute to any educational charity. The David Hume Tower, the Rhodes statue, the Fisher window: fuck the lot of ’em.

    Our recent charitable contributions have been far smaller than they used to be and have all been to local causes. Often Christian, alas. But what’s an atheist to do if it’s the god-botherers who avoid wokeness?

  29. The most hated tax is any tax which is levied on you and not on other people.

    Anyway, is it more or less ‘thefty’ than taking over 40% of my earned income? As someone who will inherit very little, but who earns a lot, if we are going to have taxes then Inheritance tax please.

    Dunno what the law is in Blighty, but over here in Texas we have the notion of a Trust.

    We have them here, but they are reserved for Socialist politicians who spend a lifetime railing against tax avoidance.

  30. On the lucky sperm club thing. I’m not convinced on why we should expect it should take only one generation to get to the top echelons of a meritocratic society. Yes bound to be some who can do it, had nuttin, right ability, right place, right time, Citizen kane kind of thing. But is it reasonable to expect that for the entire cadre of high achievers? That would mean every generation is sorted in 25 years or so and then we start from scratch including their offspring. It sounds much more plausible that under meritocratic pressure the ladders work their way over 1, 2,3 generations favouring incremental steps and avoiding cataclysmic snakes. Of course most don’t make it to the top anyway and i’d guess helping them avoid the snakes is the best help kids get from parents.
    To take the example of private education. Often used as an indicator that things ain’t meritocratic. If you insist nobody can be meritocratically improved by private education. And even if they do accept its and improvement they tend to say since it’s an advantage bought by parents the system’s rigged, it’s anti meritocratic. Improving someone’s abilities over and above what the state and other parents can achieve for their kids is still improving the net abilities available. So i think lucky sperm club argument is rather overdone.

  31. @Hallowed Be – Don’t forget the old adage from 1860’s America – “From shirtsleeves to shirt sleeves in three generations”. Still about sums up the rise and fall of most wealthy families. Not all mind.

  32. -JG – well yes there’s that. Regression to the mean is going to happen sooner or later.Even with those illustrious family’s history the focus is on the line of inheritance, or surname, rather than the whole tree or genealogy. Still, parents improving their kids academic and character skills to succeed on their merits, that also raises the mean.

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