Areas of Expertise >> Inheritance Tax Planning

"NOTHING IN LIFE IS CERTAIN EXCEPT DEATH AND TAXES" Benjamin Franklin

Inheritance Tax is the tax paid on your assets when you pass away, these include assets owned both solely and jointly. Assets may include:

  • Your home
  • Investments / Savings
  • Insurance Policies
  • Cars or expensive personal belongings
  • And many more!

For the Tax Year 2006/2007 Inheritance Tax is due on the value of your estate that is over the nil rate band, the nil rate band is currently £285,000. After the nil rate band your assets are charged at 40%.

An important detail to remember is that any Inheritance Tax due following a death, MUST be paid before the funds held in the estate are released. For Example, if there is an Inheritance due to a child of £2,000,000 but the Inheritance Tax bill is £1,000,000, the one million will need to be paid before he or she can have access to the two million.

So how does Inheritance Tax work?

Example:

You have an estate worth £570,000 (including your home, all assets etc)

Once you have passed away, the nil rate band is removed - £285,000 (06/07)

Leaving an estate worth £285,000 to be taxed at 40%

Leaving an Inheritance Tax bill of: £114,000

Craig regularly presents financial seminars across South Wales and the UK, discussing the options surrounding Inheritance Tax. But we feel there are 5 main routes that can be taken where there is IHT liability:

  1. Nothing!
  2. Spend your Money!
  3. Make Lifetime Gifts
  4. Life Cover
  5. Estate Planning

I will not concentrate on each area now as each is subject to circumstance and regulation, I will also mention that no one option is ideal for everyone, when Craig conducts a meeting with yourselves and there is an Inheritance Tax liability, Craig will assess your personal situation and then suggest the option that fits your individual needs. It may be that a combination of options could provide the most advantageous position for your spouse and beneficiaries.

If you believe that you may incur an Inheritance Tax Bill it is important that you have a chat with an Independent Financial Planner as soon as possible, to ensure that the correct measures are in place. The first step is usually to draft a will; if you already have a will now would be a good time to have a chat with an adviser or solicitor to ensure that your will has been structured correctly to encompass any Inheritance Tax liability.

Craig can also suggest measures that may help in regards to Long Term Care liability; as well as planning for Inheritance Tax liability when you are substantially over the nil rate band.

The important factor is to act quickly and ensure that any literature or information you read or receive is followed up with a meeting with a professional, ensuring that all of your questions are answered and your circumstances have been taken into consideration prior to any action being taken.

Lord Jenkins once said that Inheritance Tax was:

"... essentially a voluntary levy paid by those who distrust their relatives more than they dislike the Inland Revenue"

To arrange an appointment with Craig or to find out more about our financial seminar programme please call 02920 359359 or drop Claire an email.

The FSA does not regulate Inheritance Tax Planning or Wills