Inheritance Tax Planning

Inheritance Tax and associated planning is a complex area and detailed and considered plans need to be made. With careful planning within the tax laws we can guide you to make the most of inheritance tax mitigation rules to reduce the burden on your estate.

Inheritance tax of 40% is paid when someone dies and has an estate that is in excess of the Inheritance Tax allowance (for the 2014/15 tax year the allowance is £325,000). It can also be payable on gifts or trusts made during someone’s lifetime.

We advise on and consider the following strategies that you can do to reduce your family's tax bill.

Wills - It is important to make an effective will. If you don't leave a will, your estate will be shared out among your next of kin according to a strict order of priority called the 'rules of intestacy'. This means that people you want to benefit from your estate - such as a partner you're not married to or in a registered civil partnership with - might get nothing.

Exemptions - There are a number of exemptions you can use to reduce the value of your estate.

Gifting - If you can afford to give away some of the assets you own, it may be possible to reduce the size of your estate. Any amount of money you give away outright will not be counted for inheritance tax if you survive for seven years after making the gift. If you die within this period, the amount of the gift will be included within your estate. A relief called taper relief may apply in these circumstances and can reduce the amount of inheritance tax due.

Life assurance - set up under an appropriate trust the proceeds could be used to help pay inheritance tax on death.

Trusts - If structured carefully, trusts can help to reduce or possibly even eliminate your inheritance tax liability.

Married Couples/Civil Partners?

There is no inheritance tax when assets pass between married couples and registered civil partners (on death or during lifetime and assuming the spouse or partner is domiciled, or treated as being domiciled in the UK). Prior to October 2007, the inheritance tax allowance of the first spouse/partner to die was lost when assets were transferred to the surviving spouse/partner (unless a trust had been put in place). This then meant that the surviving spouse/partner only had their own allowance to put against their whole estate.

Since October 2007, married couples and registered civil partners can effectively increase the threshold on their estate when the second /spouse partner dies – to as much as £650,000 in the 2014/15 tax year.

Call us on 015395 67129 to discuss Savings and Investments