Inheritance Tax & Estate Planning

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Inheritance Tax is the tax paid on assets left when someone dies after any allowances or exemptions are applied.

IHT and estate planning involve creating a plan as to how to pass your assets on to your intended beneficiaries in the most tax-efficient manner whilst still maintaining control if desirable.

There is no magic wand for waving away inheritance tax, and generally speaking the earlier the start the more options there are available to youto ensure that you pass on maximum wealth to your intended beneficiaries.

Inheritance tax advice

IHT is no longer a tax for the very wealthy and many people will find themselves with an IHT liability on death. Broadly speaking, if your estate (the combined value of your assets) is worth over £500k for a single person, or over £1m for a married couple then you will have an IHT liability unless you do something about it. The sooner you start to think about IHT the more options there will be available to you.

When we advise on IHT, the first thing we will do is confirm your current exposure, taking into account any reliefs available.

We can then provide initial thoughts on the types of things you might want to consider which will help you achieve your objectives. Once you have considered your options we can discuss and advise upon a specific approach for you working closely with lawyers to ensure that your will and any other legal documents correctly reflect your wishes.

Estate planning

Estate planning often comes hand in hand with IHT planning but the focus here tends to be on asset protection. Good estate planning means that you can be sure that only those that you want to benefit from your estate will do so. For example, you may be concerned about your children getting divorced and their spouse inheriting your assets or creditors of your business inheriting them. We work closely with lawyers on estate planning matters to ensure that your will correctly reflects your wishes.

Case Study

Inheritance Tax & Estate Planning

Gift made by deceased during lifetime

Intro

We were approached by our client who’s father had passed away. He made a substantial lifetime gift to his daughter to assist in purchasing a property.

Issue

The father was living in the property rent free, so a benefit might have been retained from the gift. This could have potential costly IHT implications or a hefty income tax charge by falling foul of anti-avoidance legislation.

How we solved it

We researched to establish whether the gift fell within the ‘Gift With Reservation of Benefit’ legislation or the ‘Pre-owned asset’ rules.

It was determined that the transaction fell within the ‘Pre-owned asset’ rules, however it was likely subject to an exemption as the rental value was de-minimus.

The Outcome

This provided clarity to our client that no reporting was required in respect of the transaction and IHT or income tax was not payable.

For further piece of mind, we recommended the client obtain an external valuation of the rental value.

Saving IHT in passing on wealth

Intro

We were approached by a client who was reaching her mid-70s and was considering how to tax-efficiently pass on her wealth to her family.

Issue

To do this, she needed to consider what her current exposure to Inheritance Tax (IHT) was, to then understand how much of her wealth could be passed on.

She then wanted to consider what planning opportunities were available to reduce that exposure and prevent her estate from growing further, before her death.

How we solved it

We gathered all the relevant background to understand her circumstances and what structures would be suitable for herto achieve her objectives.

We provided calculations of her current exposure to IHT.

We then provided recommendations based on her circumstances to reduce that exposure, including opportunities for making lifetime gifts, making strategic investments, will planning, trusts and the potential to set up a family investment company (FIC).

This included considerations of any beneficial exemptions and reliefs available to her.

The Outcome

Due to our expertise we produced a bespoke advisoryreport on the opportunities available to her to reduce her potential IHT bill. If she were to implement the planning to its fullest potential, her IHT bill would be reduced from approx. £1,300,000 to £300,000, a tax saving of £1,000,000.

This ultimately would provide more of her estate left over for distribution to her family.

The advice gave her clarity on the actions she needed to take and the timings of those actions in order to implement the planning effectively.

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