As you progress through retirement is it not unusual to gradually become less active, particularly in your later years, and consequently to spend less. You may therefore move your focus from generating income to passing your wealth to your family as efficiently as possible. Inheritance Tax Planning passing on yourwealth Neil Hewitt Chartered & Certified Financial Planner at Scrutton Bland looks at some of the options for passing on your wealth.
I f your estate value on death exceeds £325,000 (£650,000 for a couple), the excess value will be liable to 40% Inheritance Tax (IHT) which can be a very significant reduction to the estate value passed to your beneficiaries. There will be an additional “Residential Nil Rate Band” introduced from 2017, initially at £100,000 increasing £175,000 by 2020. This will bring the total Nil Rate Band (NRB) up to £500,000 per individual (£1m per couple) but this will not apply to everyone. There are many ways in which this can be achieved, one of the simplest methods is to gift money or assets to those you wish to benefit. However, this is not as simple as it seems. Firstly, once gifted you no longer have access to that asset/cash or any income from it; you may not need the income at this point but you may need it in future years for say, care costs. Secondly, making a gift of an asset may incur a Capital Gains Tax (CGT) liability on you. Thirdly, even though you no longer have the asset you will need to survive for seven years from the date of the gift for its value to be excluded from your estate for IHT purposes. You can consider trust arrangements during your life, or via your wills. These can be a very effective way of passing capital and controlling how beneficiaries receive capital and in what order. However, they can also be complex and often do not avoid the IHT issues. You could instead consider a multitude of different IHT mitigation plans/investments each with varying degrees of access, control, income options and IHT effectiveness. These types of plans must be considered carefully to ensure that they suit your specific circumstances and needs. They could range from plans with no
access to the capital invested but ongoing income, to those with full access to capital. Investments with immediate reduction in IHT liability on part of the investment with the rest exempt after seven years to those that will be fully exempt after only two years - and the list of variations goes on. You may have an asset that you would like to shelter from IHT but to do so would mean suffering CGT on sale of that asset. There are investments that can defer/avoid CGT and gain IHT exemptions to meet this need. Such plans can also offer a variety of other tax benefits including Income Tax Relief, CGT benefits, loss relief and tax free incomes. The question is not really “is there a solution to my Inheritance Tax problem” but instead “which option(s) best suits my specific needs”. These solutions are highly specialised and it is important that you seek advice from a Chartered and/or Certified Financial Planner. If you would like to arrange an initial meeting, without obligation, please call on 01473 267000 or email neil.hewitt@scruttonbland.co.uk If you are interested in finding out about IHT planning, why not join us at our roadshows being held around Suffolk this year. Places are limited so please register with Karen Free on 01206 838400 or email karen.free@scruttonbland.co.uk Scrutton Bland Limited is authorised and regulated by The Financial Conduct Authority
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