We don’t do Wills, but you definitely need one
Your Will is your declaration of how you want your assets to be managed or distributed when you die
Anyone can write a Will for you, and plenty offer to do exactly that but, beware, UK law places great emphasis on whether or not your Will is valid
If you’re reading this, then it’s likely that you have a few pennies to rub together, so get a specialist lawyer to do the job for you properly
Death is usually the very last opportunity HMRC gets to tax you and it’s an opportunity they’re not going to miss
Every person currently has a nil rate band of £325,000 for Inheritance Tax (IHT) purposes. Married couples, or those in civil partnerships, each have a nil rate band, so £650,000 in total
In addition, upon death, both partners or spouses have a main-residence nil rate band of up to £175,000 each, and it’s transferable between them
If your total assets are worth less, there’s no IHT to pay. Anything in excess, is taxed at 40%
So, do the numbers for your estate as, without planning, you’re likely leaving a sizeable legacy to the taxman. If that’s deliberate, that’s your choice, but oftentimes it’s not..
Let’s get our creative pants on..
You don’t have to die to use your nil-rate-band. You can use it right now, today. Gift, say, £650,000 into a Relevant Property Trust, survive 7 years and the entire amount is outside of your estate
Then in 7 years, you do it all over again, and again, and again – assuming you live long enough
Actually, you can probably gift a little more by using your annual exemptions for this year and last year
Simple planning which may save your family £279,200 every seven years
Under the heading of ‘close to useless exemptions’ are small gifts of £250, wedding gifts of up to £5,000
Potentially much more useful is ‘normal expenditure out of income’. It needs thought and planning and typically falls beyond the remit of bread and butter IHT planners. Rest assured, this topic has huge potential and it’ll be one of the areas we will focus on with you..
Other assets can pass tax-free at death too
Each person can have a Self-Invested Personal Pension (SIPP) or a Small Self-Administered Scheme (SSAS) fund of up to £1,073,000 which may pass tax-free
More interestingly, the entire value of a Qualifying Non-UK Pension Scheme (QNUPS) may be outside of IHT and the only limit is the amount of the contribution which must be ‘reasonable’
Life insurance and Death in Service benefits, when properly written in trust, are outside of the estate for IHT
Business Relief of up to 100% applies to shares in qualifying businesses, usually meaning trading companies
Up to 100% Agricultural Property Relief may be available to farmers
Without wishing to get technical, investments in Enterprise Investment Schemes, Venture Capital Trusts and those where Business Relief is available, are outside the scope of IHT