Inheritance Tax Planning for Vets
When we die, we all would prefer to leave as much of our wealth to our beneficiaries as possible. Even with a detailed will outlining our intentions, Inheritance Tax (IHT) can substantially reduce the amount our beneficiaries actually receive.
Research from Her Majesty’s Revenue & Customs suggests the number of estates caught by inheritance tax has continued to grow over the years. However, by planning ahead, there are ways to limit the percentage of your assets to which the Government is entitled.
If you are a UK Domicile, IHT is a tax on money or possessions you leave behind when you die, and on some gifts you make during your lifetime. Your estate is the total value of your assets (property, car, bank accounts, investments etc.), including those given away in the seven years prior to death, less any outstanding bills, debt or funeral expenses.
Inheritance Tax Allowance
The tax-free IHT tax allowance is currently £325,000 and will remain so until 2014-15. Above this ‘Nil Rate Band’, tax of 40% is usually payable. If you are married or in a registered civil partnership new IHT rules allow partners to pass their possessions and assets to each other tax-free and, since October 2007, the surviving partner is now allowed to use their own tax free allowance and any of the balance of the nil rate tax band not used on the death of their partner. This has the potential to effectively double the amount the surviving partner can leave behind tax-free without the need for special tax planning.
Making a Gift
As well as on your estate at death, IHT may also be payable on gifts you make during your lifetime, especially if you die within seven years of making the gift. The laws are strict in which constitutes a “gift” and what doesn’t and they fall into four basic categories:
- Always tax-free irrespective of when you make them
- Potentially tax-free
- Taxable, but no tax due at the time the gift is made
- Taxable, and tax is paid at the time the gift is made
When a person des without leaving a valid will, the estate must be shared out according to certain rules known as the rules of intestacy. Only married or civil partners and some other close relatives can inherit under the rules of intestacy
It is possible to substantially reduce the amount of IHT applied to your estate through the use of suitable Trusts. A Trust lets you decide how assets should be distributed in the future, and can provide financial security for your beneficiaries.
Our team of Independent Financial Advisers can assist you in planning for IHT. By working with your Solicitors or by setting up suitable Trusts, utilising the allowances to which you are entitled and arranging appropriate insurance, we can assist you in ensuring as much of your assets as possible reach your family and others.
If you would like to discuss your requirements with one of our Independent Financial Advisers then please complete the enquiry form and we will contact you to assess your circumstances, review the tools available and then present options for you to consider.
Please note that when discussing or reviewing your financial situation we will need to conduct a brief fact find in order to fully understand your goals and objectives. This will provide us with the necessary information upon which to base any recommendations and ensure they meet your objectives and wider financial planning needs.
This information is based on Lloyd & Whyte (Financial Services) Limited’s understanding of current legislation and HMRC Guidance at the time of print which may change. It does not constitute legal or tax advice and must not be treated as such. Whilst every effort has been made to ensure that the information is correct, we cannot accept responsibility or liability for any omission or inaccuracy provided in this document.