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WILLS, ESTATE PLANNING & INHERITANCE TAX PLANNING Harlequin Financial Management 

WILLS, ESTATE PLANNING & INHERITANCE TAX PLANNING 

We have many clients who have reached the stage in life where they have the income from pensions and investments that they need. They now wish to consider ways in which any anticipated inheritance tax can be minimised. It's important to note that HMRC rules allow us to plan to do this in many ways. It is no different in principal to investing in a tax efficient investment such as an ISA or pension. We only advise on established solutions that operate with the full knowledge of HMRC. Our clients want to pay the right amount of tax, not too much and not too little. 

HOW MUCH IHT WOULD BE PAYABLE? 

Usually, there would be no IHT to pay if the value of the estate is below £325,000. Everything above this is taxed at 40%. The threshold is per person (so £650,000 for a married couple or registered civil partners) and any unused percentage of this can be passed between married couples and registered civil partners. You may be able to take advantage of something called the ‘Residence Nil-Rate Band’ (RNRB) which now stands at £175,000.  
This applies when the property, or assets representing the property are left to direct descendants. It is important to check your will to ensure that, if relevant your main residence is clearly left to direct descendants, and not as we sometimes see, left to a discretionary trust. Entitlement to this exemption is also gradually withdrawn, or tapered away, for an estate valued at more than £2 million. This will be reduced by £1 for every £2 that the value of the estate is more than the £2 million taper threshold. 
For higher value estates it is particularly important to understand what the IHT liability may be. Assets passed between spouses or civil partners are usually exempt from IHT and so are assets left to a registered charity. In addition, money that you give away outright will not be counted for IHT 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 but there may be a gradual reduction in the IHT liability on these gifts within the 7 years. 
 
 
 
 

HOW CAN I PLAN TO MITIGATE OR REDUCE INHERITANCE TAX? 

There are a number of things you could consider doing to help reduce your IHT bill. Wills and trusts are not regulated by the Financial Conduct Authority. 
Firstly, undertake a calculation of what the liability might be. From this you can start to plan effectively. 
Make a Will – simple and easy and correctly drafted can immeditaley reduce IHT liability. Contact us to explain more. 
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. 
Moving assets between spouses or civil partners does not create a tax liability. 
Charitable legacies - If you leave 10% or more of your estate to charity, the rate at which IHT is charged will also be reduced to 36%. 
Think about life assurance – this won’t actually lessen your IHT but the proceeds could be used to help pay the bill on death. 
Trusts - if structured carefully, Trusts could help to reduce or possibly even eliminate your IHT liability. Trusts need not be complicated. 
Investments - using tax-efficient investments that benefit from Business Relief can significantly reduce an IHT liability. Similarly, investments such as a Discounted Gift Trust (DGT) can immediately reduce any liability. 

EVERY SCENARIO IS DIFFERENT ARE MANY MORE & THE SOLUTION DEPENDS ON THE CLIENTS CIRCUMSTANCES. 

John Hitchcock is a Member of the Society of Will Writers and can advise you regarding your Will, trusts and Lasting Powers of Attorney. 
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