Inheritance Tax Planning

Concerned about inheritance tax?

The subject of inheritance tax is a concern to many as it is truly a tax on money and assets that have already been taxed. Over a lifetime you pay income tax on your earnings, and with what remains you build your pot for the family and for your retirement. Any growth on assets that are sold are subject to capital gains tax, further reducing what is left.

To some degree you have a choice as to whether inheritance tax is payable when you pass away. It is a tax on what is within your estate immediately before you die, but is complicated by various factors, such as:

• What assets you gave away in the last seven years of your life
• The capital value of a trust where you have the right to use the income from a fund or to live in a property
• Any assets that by-pass the probate process and are redirected on your death to a co-owner, such as money in a joint bank account

It is your choice whether to seek professional advice to see what legitimate steps are open to you to reduce inheritance tax.

If you take no action, you are a sitting target for the incumbent government, as on death they get the opportunity to inspect your financial affairs, both current and historic. Your Executors must complete detailed tax returns, whether or not tax is payable.

Do you need to review your Will?

Inheritance tax is always under a review, with a relaxation or tightening of the grip on your finances over the decades. Some Wills written years ago are now more complicated than they need to be, as they were made at a time when the tax was harder hitting. With transferable tax allowances now allowed between spouses and civil partners, these Wills would benefit from being re-written.

The new residence nil rate band provides tax savings to a family that has equity in a home in which they have lived which they are passing on to lineal descendants. Wills that have not been reviewed may be written in a form that will prevent this additional allowance from being claimed. We can assist in ensuring that this tax saving becomes available to you.

Our tax planning solicitors

Within tax planning, we look at how any tax that may be due will be paid. There is a time limit for the payment of the tax and it has to be paid before an application for a Grant of Probate can be made. This means that your house cannot be sold to pay the tax, leaving your family with a headache as to how to raise the money within six months.

Inheritance Tax is an easy way for the government to raise much needed cash to add to the public purse. It is likely that there will be further changes which will not please families. Even if the government does nothing, the incidence of tax will rise, as annual indexation of allowances has ground to halt. More estates will therefore become subject to tax as property values increase and the nil rate band and residence nit rate band remain static.

We can help you explore legal ways of reducing the impact of inheritance tax, while at the same time protecting your own position for the remainder of your life. This will help to preserve your assets for the generations to come, ensuring any wealth you have acquired is not unnecessarily decimated by tax liabilities.