Inheritance Tax Planning

If you properly plan and prepare, you could save your family thousands of pounds of inheritance tax payments.   But if you don’t put a plan in place before your death, your family could end up paying a huge death tax bill.  Forty percent tax is due on all estates over the nil rate bands (see below) so it’s worth investigating your options long before your family needs to worry about it.
                    
Inheritance tax is payable on the worldwide assets of UK estates that are more than £312,000 for individuals and £624,000 for married couples and those in civil partnerships.  Inheritors are taxed at 40% on all assets above that limit.   The tax threshold for inheritance tax is set to rise over the next few years, rising to £350,000 for individuals and £700,000 for married couples/civil partners, in the fiscal year 2010/2011.  The tax is payable after six months from the month in which the death occurred.

It’s not just money that’s included within the inheritance allowance.  The total value of the estate might include cash, investments, property, cars, furniture and other valuable objects such as works of art etc.  It’s easy for those individual items to add up to more than the tax threshold.  For this reason, it’s important to plan carefully and intelligently.

Some Smart Ways to Avoid Inheritance Tax

TOP IT UP: One smart way to avoid inheritance tax is to use some of your assets to top up your pension and enjoy a better standard of living now, rather than leaving all of your money to someone else.  

WILL IT: One of the first steps to efficient inheritance tax planning is to make a will.   If you do not make a will, you will have no say in how your estate is shared out.  This could mean that your closest relatives receive all of your estate rather than any unmarried partner.  If you make a will and leave your estate to your spouse or legal civil partner, they are completely exempt from inheritance tax as they are considered as an exempt beneficiary.

GIFT IT NOW:  After death, there are strict limits on what can be gifted to an individual other than your legal partner.  However, anything gifted to an individual seven years or longer before the death occurs is considered exempt from inheritance tax.  If you plan to will your home to your children, it may make sense to gift your property to them long in advance of the event of your death.  However, you will then be a tenant and there are potential pitfalls with this if expert advice is not sourced. Effective use of trusts can be of significant benefit.

GIVE IT AWAY:  All money that is willed to a charity is exempt from taxation.  If you don’t want the government to have it, this can be a great way to do some good after you’re gone.

Limiting the tax that your beneficiaries pay on their inheritance requires an expert.   This is not a simple one-size-fits-all subject, requiring years of experience and an understanding of the law and regulations around inheritance tax. Speak to a financial advisor about effectively planning how your estate is taxed after death.

Hanson Wealth Management have experts in effective inheritance tax planning, contact us today to see how effective planning could help you.

Hanson Wealth have offices in Boldon, Durham, Inverness, Standish and North Berwick. We have a community of independent financial advisers based throughout Scotland, England, Wales and Northern Ireland as well as a variety of services available over the telephone or via the internet. So even if you are not based near to one of our branches, we can still ensure that you will get quality independent financial advice from our IFA team.

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