Inheritance Tax Planning

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

Tax treatment varies according to individual circumstances and is subject to change.

Trusts is not regulated by the Financial Conduct Authority.

What is Estate Planning And 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.

Inheritance tax planning will help you ensure more of your wealth stays with your family and other beneficiaries.  The current threshold for IHT is £325,000.  Anything over this amount is taxable at 40%. Contact us to talk about financial planning in Sutton Coldfield and across the area.

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

There are a wide range of options available when you are considering your Inheritance Tax planning. Everyone’s circumstances are different and the advice we provide will be tailored to your specific needs.

It is very important to seek the advice of a qualified Financial Adviser 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.

Life Insurance Example

One option to consider is a life insurance policy.  This won’t reduce the amount of IHT owed to the Inland Revenue, but it will provide a sum of money to pay some or all of the tax liability and the money arrives at just the right time.

Let’s look at an example based upon a male and female married couple who are both aged 65, non-smokers, are fit and healthy and have no historic medical conditions. They expect to have an IHT liaibility of £200,000 when the last one dies.  If they took out a life insurance policy for this sum, it would be available at a monthly cost of £358.28*.  On the face of it, this looks expensive.  But, the last survivor would have to live to the age of 111 before the premiums they’ve paid exceed the IHT bill on death.

*Source: Iress Comparison Report Whole Of Life 20.09.19

We have a large team of Financial Advisers who can talk to you about a host of different ways you can take action for your estate planning, scroll down for more information. So, for Inheritance Tax planning local to Sutton Coldfield and throughout 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 many 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. We can work closely with your family and Executor throughout the process.

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 insurance – a life insurance policy 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.

Contact us and arrange to see one of our Financial Advisers and see how we can help you with your estate planning. Because we provide local financial advice in Sutton Coldfield, we can visit you in our home or you can come to our office which is close to both Lichfield and Sutton Coldfield.

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