Inheritance Tax Planning
Inheritance has become a hot topic amongst politicians in recent years. It is one that we ignore at our peril. Without the right inheritance tax provisions the Government could benefit more from your life’s work than your family. That’s why it is important to work out what you may be liable for on death.
IHT is charged at a flat rate of 40% on your estate at death. Your estate will include all the assets you own, such as your house, cash in bank accounts and personal belongings, but will also include any foreign assets, any assets you have given away in the last seven years, assets which you have given away in which you still retain an interest, and also the capital value of trust funds from which you receive an income.
Some exemptions help to reduce the IHT that will be payable. The main exemption is the Nil Rate Band. From April 2009 this is £325,000. This means the first £325,000 of your estate will be exempt from tax – however, if your home or your share of your home is included in your estate, it is easy for your estate to exceed this threshold.
There are various methods of planning your estate to ensure it is both efficient for IHT purposes and provides for your beneficiaries properly. A professionally drawn Will is always the foundation of IHT planning.
Exemptions and Reliefs
Exempt Beneficiaries – in your Will, you can leave assets to beneficiaries who are exempt from IHT. For example: assets left to a spouse or civil partner, gifts to charities
Transferable Nil Rate Band – if you are married or in a civil partnership, any percentage of your Nil Rate Band that is not used on your death can be transferred to your spouse or civil partner. Therefore, as a gift to a spouse or civil partner is exempt from IHT, leaving the whole of your estate to them means your full Nil Rate Band would be unused, so your surviving spouse’s own nil rate band will be doubled.
Business and Agricultural Property Relief – if business property or agricultural property form part of your estate, careful planning can ensure that relief of up to 100% is available on these assets. However, ‘business’ and ‘agricultural’ property is specifically defined, and there are certain restrictions and conditions so eligibility should be discussed with us.
The Financial Conduct Authority do not regulate will writing, trusts and inheritance tax planning.
Will writing is not part of the Quilter Financial Planning offering and is offered in our own right. Quilter Financial Planning accept no responsibility for this aspect of our business.