Inheritance Tax Planning

Inheritance Tax Planning

Inheritance Tax used to be something that only the very wealthiest needed to worry about but that is no longer the case. Increased prosperity and rising asset prices have brought many individuals with seemingly modest assets within the Inheritance Tax net.

Inheritance Tax is payable at 40% on assets that form part of an individual’s estate and exceed their available Inheritance Tax allowances and are not otherwise exempt.

The main allowances available to the estate of the deceased are the £325,000 Nil Rate Band and up to £175,000 Residence Nil Rate Band. The latter is only available up to the value of the individual’s main residence and is gradually withdrawn for those who have estates of £2,000,000 or more. Allowances that are unused on first death can typically be transferred between married couples.

We can help you carefully plan to reduce the impact or in some cases, avoid entirely any charge to Inheritance Tax, but as with most planning, leaving it to the last minute significantly restricts the options available. Planning could include:

• Making use of the various Inheritance Tax exemptions;
• Making gifts, either one off or regularly out of surplus income;
• Creation of lifetime trusts;
• Life Assurance policies, which can be written in trust to provide tax free benefits;
• Investing in assets which offer complete or partial IHT exemptions

There are many options open to clients who wish to consider them including schemes which allow capital to be gifted and yet still allow access to an income stream and schemes which remove assets from the taxable estate after just two years.