Preparation is key to planning for Inheritance Tax

In the current market with property values growing strongly, it is essential to keep an eye on the value of your estate when it comes to Inheritance Tax. Your property’s value could have grown to a level that makes you liable for Inheritance Tax (IHT).

It is not only the value of your physical property that is growing, also the contents of your property with possessions such as antiques and valuables rising in value. It can be a surprise to find out how much your estate is actually worth.

With these thoughts in mind we suggest that the best form of Inheritance Tax planning is early Inheritance Tax Planning.

Some considerations to think about:

  • The longer you wait, the more expensive a life assurance plan designed to meet any tax bills will be
  • The use of exemptions can ensure that money goes where you want it to both before and after you die
  • Gifts can be made that become free if of Inheritance Tax if you have survived them by seven years

There are a number of Inheritance Tax planning options available to you that cover a multitude of different requirements.

One area of options is to look at establishing a Trust.

A trust helps you to move assets out of your estate. The benefit being that if they are out of your estate they will not be included in any IHT calculations and can be made available to your beneficiaries after your death.

This table shows the impact of the Budget announcement on estates of different sizes. Some will pay less inheritance tax, but others could end up paying more.

Inheritance tax changes

Value of joint estate
(including family home)

IHT due under current rules

IHT due in 2020

Change in tax due

£500,000 nil nil £0
£1,000,000 £140,000 nil -£140,000
£1,500,000 £340,000 £200,000 -£140,000
£2,000,0001 £540,000 £400,000 -£140,000
£2,700,0002 £820,000 £820,000 £0

Table notes
1 Tax-free allowance withdrawn at rate of £1 for each £2 above £2,000,000 threshold
2 No extra allowance applies above £2,700,000

Summary

A summary list of available Trusts currently available are:

  • Absolute Trust
  • Interest in possession Trust
  • Discretionary Trust

Part of our planning process is to ensure that Inheritance Tax issues have been discussed and provisions for this have been made. Should an IHT bill still be inevitable, then a Life Assurance Policy could be another option.

One aspect of Inheritance Tax planning where our team dedicates much effort is to ensure that all of our clients have plans in place that meet the latest rules as set by the chancellor.