Inheritance Tax Planning

Inheritance Tax Planning is not regulated by the Financial Planning Authority.

What is Estate Planning & Inheritance Tax Planning?

Your estate is the total value of all the things that belong to you or jointly belong to you when you die. This includes things like your home and other properties, your car, savings and investments, shares, pension benefits that may be payable to your loved ones, your belongings and so on, the list can be very long. Gifts made within seven years of your death and assets held in trust are also included in calculating the value of your estate.

See Calculating The Value Of Your Estate And Inheritance Tax section below for more information.

We Can Help You Reduce Inheritance Tax Or Perhaps Not Pay Any At All

It is very important that you consider estate planning especially if you have children, grand-children or other loved ones that you wish to pass your estate to. It is very important to seek the advice of a qualified Financial Adviser local to Sutton Coldfield or where you live because the rules surrounding pensions, investments and savings are constantly changing. For example, did you know that while ISAs are tax efficient when you are alive, they can have disadvantages? Funds left to a spouse are free of IHT, those passed directly to children or other beneficiaries are not.

We have a large team of Financial Advisers who work across the Midlands. So for Inheritance Tax planning and Financial Advice local to Tamworth and surrounding area, please contact us.

Inheritance Tax Planning Case Study

This case study is for illustrative purposes only and does not constitute advice.

One of our clients came to us when she was 75 years young, in good health and with two children. She had recently been widowed and had two main priorities:

  • To help her children financially, even after she has passed away
  • To minimise the amount of Inheritance Tax that her estate (children) would need to pay – basically she thought she and her husband had paid enough tax over the years!

One of our fully qualified Financial Advisers completed a comprehensive fact-find with the client. Her total assets amounted to over £1m. When her husband died his Will directed that all his assets should pass to her. So, when calculating the amount of Inheritance Tax we could also use her husband’s personal IHT allowance (this is now called a Nil Rate Band).

The client was happy to set aside money from her savings and investments in order to help the Inheritance Tax position, but was concerned because she felt she needed an income from the money.

The value of pensions and investments and the income they produce can fall as well as rise. You may get back less than you invested.

Our Advice

Our advice was to put some money into a Discounted Gift Trust and a Loan Trust the benefits of each investment, in her individual circumstances, are as follows:

Discounted Gift Trust

  • An immediate saving of £40,000 Inheritance Tax, so if the client died within 7 years the IHT bill would be halved
  • After 7 years there would be no Inheritance Tax Liability
  • This investment generates £8,000 per annum for the client

Loan Trust

  • Full access to this money if needed
  • Growth on the investments falls outside the estate making it more likely that any future IHT liability will be removed/reduced
  • If any IHT bill should become payable in future, the monies held in this investment would become immediately available to help pay this tax bill
  • Client can withdraw money every year to use her gift allowances, which makes her financial planning even more effective

The Outcome Achieved

Our client has enough income to enjoy her later years. She has enough capital to fall back on if she needs it. She has potentially saved her children an Inheritance Tax bill of £76,000.

How You Can Reduce Your Inheritance Tax Bill

There are a number of things you can do to reduce your estate’s tax bill and we can help you through our effective estate planning service. After your death we can also help your family to calculate the value of your estate and get the funds from your pension providers and other financial institutions. This can be a complex and time consuming task and we can work closely with your family and Executor throughout the process.

Contact us and arrange to see one of our Financial Advisers, the first meeting is at our expense and without obligation and find out how we can help you with your estate planning. Because we provide local financial advice we can visit you in our home or you can come to our office in Shenstone Wood End, which is close to Tamworth, Lichfield and Sutton Coldfield.

Here are some of the things you can do to lessen the amount of Inheritance Tax your family may need to pay the when you die.

  • Make a Will – an effective will could help to reduce your inheritance tax bill. Note: Will writing is not regulated by the Financial Conduct Authority
  • Look into exemptions – there are a number of exemptions you can use to reduce the value of your estate. For example, moving assets between spouses or civil partners does not create a tax liability
  • Consider gifts – if you can afford to give away some of the assets you own, it may be possible to reduce the size of your estate, you can make gifts of up to £3,000 annually
  • Think about life assurance – a life assurance plan won’t actually lessen the inheritance tax bill but the proceeds could be used to help pay the bill on your death
  • Consider trusts – if structured carefully, trusts can help to reduce or possibly even eliminate your inheritance tax liability. Note: Trusts are not regulated by the Financial Conduct Authority

With a little estate planning we may be able to reduce the Inheritance tax bill paid by your estate or avoid paying Inheritance tax at all.

Calculating The Value Of Your Estate And Inheritance Tax

Things that might count towards your estate include:

  • Property, your home and other property you own
  • Investments
  • Insurance
  • Payment from a pension plan or employee death benefit (unless in a trust)
  • Other assets, for example, cars, art, jewellery, furniture
  • Gifts you have made but still benefit from, for example, a house you have given away but still live in
  • Certain gifts that you have made
  • Assets held in trust from which you receive personal benefits. If you own assets jointly, your share of their value is included in your estate

Assets passed between spouses or civil partners are exempt from Inheritance Tax providing your spouse or partner is resident or treated as being a resident in the UK regardless of their worth and how soon you die after passing your assets to them. These rules also apply to gifts made to charities.

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. Taper relief may apply in these circumstances and can reduce the amount of inheritance tax payable.

It is worth bearing in mind that tax laws can change, and sometimes this is done retrospectively which means applying tax changes to things that happened in the past such as the giving of gifts. Also, the rules for individuals who are not UK residents or not living in the UK are different and therefore tax and local laws should be taken into account. This is why it is so important to get professional advice from a qualified Financial Adviser.

Get in touch via our contact us page, by telephone or email. We can arrange to meet you at your home or our modern offices with free parking for Financial Advice local to Lichfield and right across the greater Birmingham area.