Estate Tax Planning

Inheritance Tax is now payable by those with of a relatively modest level of assets by current standards. Given the value of homes, together with life insurance policies, this is relatively easy to reach. No one likes to think of the Inland Revenue benefiting at the expense of his or her family.

If the property and assets are in joint names, it is possible that on the death of the first partner or spouse, the survivor inherits everything ‘tax-free’. Most problems occur on the second death. The secret of good inheritance planning is to eliminate or reduce the amount of tax due.

One option is to take out insurance to pay the tax. The younger you do this, the cheaper it will be. Insurance policies should be written in Trust, this means they pass OUTSIDE your estate that is free of inheritance tax.

If you have a sizeable estate and do not need the money now or to fund nursing care later, then gifts can be made every year. Larger gifts can be made but the donor must live for seven years otherwise the recipient may have to pay tax on a sliding scale. Lump sums can also be put into a Trust, for example, to fund school fees. Again the seven-year rule applies.

Each spouse is entitled to leave the nil rate band. So, if the remaining spouse/partner does not need the money, this amount can be passed directly to the children or other beneficiaries on each death, making double the value passing tax free. If the beneficiaries agree, a Will can be changed (e.g. for tax purposes) up to two years after death by a Deed of Variation.

There are many other options available and with good advice and careful planning large savings can often be achieved to benefit the family.

Please see our Fact Sheet on Estate Tax Planning for more detailed information.

Please do not hesitate to contact Mark Burn or Claire Waterhouse in complete confidence if you wish to discuss any matters relating to this area.