Along with capital gains tax, inheritance tax (IHT) is often referred to as a voluntary tax. With careful planning, it is often possible to mitigate this tax cost.
When advising you in this respect, we shall also fully explain to you the potential implications of such planning on your access to income and capital during your later years.
Before commencing any detailed IHT review or planning, it is important to determine what your overall IHT strategy is, which will usually fall into one of the following four model tax strategies:
1. Do Nothing and Don’t Worry
Maintain wealth in the form most convenient to you and do not worry (too much) about the IHT that your estate will have to pay.
2. No Tax
Give everything away (except perhaps the IHT nil rate band(s)) and hope to survive for 7 years.
Maintain life insurance to fund the expected IHT liability.
4. Balanced Approach
Re-structuring of your affairs (and your spouse’s), Will and plans to:
- Maximise eligibility to BPR and APR IHT reliefs,
- Gifting assets that do not produce income and are not pregnant with a ‘paper’ capital gains to the next generation and surviving 7 years (PET taper relief entitlement commences after 3 years).
- Establish a pattern of making regular gifts out of surplus income (say for grand children’s education),
- Calculate expect IHT liability and ring fence (preferably liquid) assets to settle it,
- Retaining sufficient rainy day cash for potential future ‘unforeseens’ eg care home fees.
Depending on the circumstances, their are numerous ways to mitigate IHT:
- Creating life time trusts,
- Making life time gifts of chargeable assets and surviving 7 years,
- Tax efficient writing of Wills,
- Making a post death deed of family arrangement,
- Re-structuring your overall investment portfolio to hold property and equity assets that will be eligible for Business Property Relief and Agricultural Property Relief.
The most popular inheritance tax service we offer is valuing your current estate:
We will then review the intestacy rules and your current Will, then calculate your current inheritance tax exposure. We shall then discuss your options for restructuring your affairs and rewriting your Will, to reduce this tax (even if at the 11th hour). We shall also discuss with you whether you should take out life cover, to insure against the residual liability.
Most people consider inheritance tax as an unwelcome reduction in the inheritance passed on to the next generation. As well as seeking to reduce this tax, our tax technicians will prepare all of the necessary paperwork and communicate with your Solicitor, so that you have peace of mind that your final tax affairs will be dealt with in a professional manner that you have come to expect.