Inheritance Tax Planning

Once considered just a tax on the rich, the increase in property values of recent years has caused many peoples personal estates to exceed the threshold (£300,000 in 2007/8) at which Inheritance Tax applies. Up to this threshold the estate is taxed at nil% (the "nil rate band"), but anything beyond it is taxed at a staggering flat rate of 40%.

For example, for a widow who dies owning a house worth £250,000, cash and investments of £125,000 and other chattels of £25,000, her estate incurs a tax bill of £40,000.  

Or take a widower with a house worth £500,000 and other assets of £300,000:- the tax bill upon death would be £200,000.

In many cases, some suitable and inexpensive tax planning, perhaps built around a suitably drafted will, can reduce the potential tax bill considerably.  

For larger estates, avoiding Inheritance Tax requires some careful thought. In many cases, avoiding it will involve divesting yourself of some of your assets during your lifetime. There are certain allowances and concessions which may be used, and you may prefer to gift assets into a simple trust structure.

What is good for one individual is not necessarily good for another. That is why we discuss your particular circumstances in such detail with you before we offer creative solutions.  

Your adviser can tell you how to achieve your aims, and (where relevant) on how to use types of trusts in so doing. Trusts are nothing to be afraid of, and indeed can frequently be set up at no additional cost when connected to a new investment of money. Most  trusts allow you a reasonable degree of control over the trust assets and their disposition during your lifetime.

As Benjamin Franklin put it, "nothing is certain in life except death and taxes". A rather more blunt reminder of the situation might be to ask "who do you like more, your family or the taxman?". Because you really can reduce the tax your estate (and hence your beneficiaries) will pay. An hour or two spent now can save your family £000's in years to come. Even nil rate band planning alone (using both allowances for a married couple) can save over £100,000 in tax at second death

Please do not delay in discussing your concerns with us. Use the feedback form to request a no-commitment free initial discussion of your circumstances, or call us on 08700 427 900.