Tax and Estate Planning

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We provide expert guidance on tax and Estate Planning, assisting you to plan in the most tax efficient way and helping you reduce your tax liabilities in all aspects of your life.

After having worked hard to build up your estate, it is important that you have a solid plan in place. This means you can pass on that wealth to the people you care about and minimise the amount of tax you pay.

It's important to make sure you aren't paying more tax than you need to. Taxation can be very complicated and the rules, reliefs and allowances often change and this is where we can advise you.

A common areas priority is how to protect the wealth that has been built up, so that it can be passed on to children or other loved-ones. The issue here is of course Inheritance Tax (or death duties as it is also known).

Before delving into the area of Estate Planning, we must first cover what Inheritance Tax is.



What is Inheritance Tax?

Inheritance Tax is paid upon death calculated against the value of the assets (the total of which make up your 'taxable estate') you have at the time of your death

Inheritance Tax is paid upon death calculated against the value of the assets (the total of which make up your 'taxable estate') you have at the time of your death. It is levied on anything over £500,000 (for single people) £1,000,000 (for a married couple).

NB part of that £500,000 per person is a £175,000 allowance for their principal dwelling house providing that property is passed to a direct descendant.

As this a relatively recent allowance, past planning in this area must be reviewed as it often has the consequence of not passing the dwelling house providing to a direct descendant and the allowance can be lost.

Despite these allowances many people today are still affected by Inheritance Tax.

The rate of Inheritance Tax is a hefty 40%, so it pays to try to minimise this if you can. The good news is that there are many concessions available. But the bad news is that these tax laws are subject to change, the area seeming to be a hot 'political potato' at times.

Planning one's 'estate' is therefore critical.

There are many methods available to reduce or avoid paying Inheritance Tax, some are detailed below:-

1. Make gifts to family members, friends and charitable organisations

You have a £3,000 'gift allowance' a year. This is known as your annual exemption.

This means you can give away assets or cash up to a total of £3,000 in a tax year without it being added to the value of your estate for Inheritance Tax (IHT) purposes.

Some types of gifts are exempt from taxation, these include gifts between spouses or civil partners and gifts to universities or charities.

2. Create a trust fund

In the past, trust funds were used to ring-fence assets for children and young people who were not 'of age'. Nowadays, trusts are an effective way to reduce or avoid Inheritance Tax.

This is because trust funds are protected from Inheritance Tax as long as they are set up correctly and in plenty of time to meet the 7-year requirement.

The benefit of any trust fund is that you or those you trust to execute your wishes effectively control the disbursements from the trust and the timing of them.

One of the ways trusts can be used is to drip-feed monies to family members rather than necessarily providing them with a lump sum payment, which is not always ideal!

Trust planning can remove the monies from your estate, whilst you retain control over their distribution and can allow your successors to receive inheritances before your death.

Trust funds can also provide a significant amount of tax relief to those with life insurance.

Where a life assurance policy is not specifically written under a trust, the insurance policy payout is added to your estate (and taxed) when you die.

Whereas, when the policy is written under trust the benefits are not included in any Inheritance Tax calculation or subject to Confirmation or Probate and received without the attendant delays these processes encounter.

These are small but important facts that could well be missed without expert financial help and advice.

One of the first questions a Financial Planner will ask themselves is whether any Life Assurance policy should be written under a trust.

3. Treat Yourself

Known by some under the acronym SKI - Spending the Kids Inheritance - this is really about spending some of your well-earned savings on the things you want and enjoy, while leaving enough for necessary future expenses.

4. Out of Income Relief

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Many people in retirement now find themselves accumulating cash as they are unable to spend the income they receive.

This cash can worsen their Inheritance Tax position.

It is permissible to either pass these monies down to the next generation either directly or through trusts and have these monies excluded immediately from the Inheritance Tax calculation, providing they truly are from income and not diminution of Capital.




What is Estate Planning and why is it important?

estate planning

As you can see, Inheritance Tax could make a very big dent in your savings and estate, leaving a lot less to pass on to surviving loved ones or the next generation - the latter is called 'intergenerational planning' - and demonstrates the real need to ensure you have a considered strategy in place.

Another issue often ignored, and which causes great harm is the issue of dealing with second or subsequent spouses and/or children from previous relationships.

Estate Planning is essential in such situations to ensure that your wishes in the event of your death are met and can often save much family heartache.

It enables us to put together a clear plan, one that details your wishes and the way you would like your estate to be managed and equally importantly distributed upon your death.

Peace of Mind for Those Applying for Confirmation (Scotland) or Probate (England & Wales)

Many people believe that Estate Planning is not needed if they already have a will. This is a common error.

While these terms may look to be interchangeable, they actually cover very different processes. Both do provide your relatives with instructions about how your assets should be dealt with after your death, but Estate Planning goes into more detail.

One of the biggest positives is the peace of mind having an estate plan in place gives. This comes because you know that when the person looking after your estate starts the Confirmation/Probate process, they will understand what your wishes were and that there will be doubts about your intentions.

Asset Protection

If Estate Planning provisions are not made or are badly conceived, the Inheritance Tax payable or temporary loss of access to the assets will come as a nasty shock for family members.

This can be avoided, but the catch is that such planning must be made well in advance. Last minute measures will not work here.

Confirmation or Probate can be a long drawn out affair which excludes your family from accessing the assets until the process is concluded, the proper use of trusts, means that the assets written under the trust are paid out to the beneficiaries outside the Confirmation or Probate process and can prevent or mitigate your family from the effects of losing access to these assets.



Financial Advice for passing on an inheritance and managing an Inheritance Tax bill

Estate Planning isn't just about passing on money when you die. It is also about making sure you enjoy life and have enough to live the way you want. It can be important to start planning early. Let us show you how much money you will need, help you to pass on assets in the most effective way, and then we can work together in reducing or managing your Inheritance Tax bill.

Contact us today and let us help you with Tax and Inheritance Tax Planning.




Tax Planning is not regulated by the Financial Conduct Authority.

The benefits to the treatment of tax will depend on your individual circumstances and may be subject to change in the future.