Inheritance Tax Planning
Do you have a liability?

Do you have a liability?

There are some rules of thumb which will give you a basic indication of whether or not you're likely to have an inheritance tax liability on your death.  As you would expect, a proper assessment of your inheritance tax liability is not nearly so simple but these rules are a good place to start.

If you find you may be exposed to an inheritance tax liability we'd strongly advise you seek a professional assessment and you can read on to find out some more about this as well as some potential solutions.

1. There is currently a nil rate band of £325,000 per person, meaning that under normal circumstances we can each leave this amount to our beneficiaries without paying inheritance tax.  If you have more than £325,000 in net assets - by which we mean your total assets minus your total debts - then it's likely you have an inheritance tax liability of 40% of the excess above this level.  There are certain assets you can pass on free of inheritance tax, or with an effective increase to your nil rate band however (such as a family home or business).
2. If you are a spouse or civil partner, or if you are a widow(er) and your deceased spouse/civil partner left everything to you, then you may benefit from the 'transferable nil-rate band' which effectively allows you to leave £650,000 on the death of the last spouse/civil partner without paying inheritance tax.  If your total net assets as a couple are greater than this amount then it is likely you will have an inheritance tax liability of 40% of the excess.


It's very important to note that your situation could be complicated by a number of factors and that the above rules of thumb are insufficient on their own.  For example if you've made gifts or created trusts in the past then these could effectively reduce your available nil rate band on death and may even result in an inheritance tax bill on the recipient of the gift.  A financial adviser can assess this for you, calculate the time-scales within which these factors will have effect and will normally be able to recommend solutions to these issues.

Likewise if you have life insurance policies then the way in which these are written can have a significant effect on your inheritance tax liability.  A life insurance policy which will pay its sum-assured to you will likely end up in your estate and will increase its size for inheritance tax purposes.  A life policy which is written 'in trust' to someone else will normally avoid this effect and may also reach its intended beneficiary far more quickly after your death.  A financial adviser will be able to assess your existing policies and recommend that they be placed into trust if appropriate.

Lastly it's important to note that legislation does change and, whilst we can assess our inheritance tax liability now, we've no way of knowing for sure what it will be in the future if the law changes.

Professional Assessment

A financial adviser qualified to advise on inheritance tax planning can make a professional assessment of your precise inheritance tax position as part of a full financial review and can recommend the most suitable course of action for you.  
If you believe you may have an inheritance tax liability and would like to know more about some possible solutions, click here.  Alternatively if you'd like to talk it through with an adviser feel free to contact us.

Next Steps

If you'd like to discuss your estate preservation options, do feel free to contact us.

Telephone:   02920 009 479 

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