Inheritance Tax

Inheritance tax (IHT) used to be known as the ‘Tax for the Rich’ however as increases in the value of property has now made more estates fall liable to the tax, it is now a ‘tax for the unprepared’

IHT is charged at 40% on the value of your assets on death exceeding the nil rate band, currently £312,000, however, you can make gifts during your lifetime which will be entirely exempt from IHT providing that you survive for seven years after making the gift. Planning to avoid the liability to IHT is a team effort involving yourself and your professional adviser and ideally this should be done as early as possible. If you wait, you pay. It would not make sense to give all your assets away at this stage, but strategic planning is possible to reduce the value of your taxable estate without having to lose your assets now.

What are you worth?

The first step is to consider the market value of your assets now and how this may change as time goes by. In doing this you also need to take into account any assets which you expect to inherit from other people and also any debts which you owe. Making a proper list and using realistic values will give you an idea of what IHT liability is likely to arise in the future. The next step is to decide where you want your money to end up and when you think it ought to get there. From there, your professional adviser will be able to work with you to ensure that your goals are met in the most tax efficient way. Most IHT planning is straightforward but requires actions now rather than just before death.

Will Writing

Many people do not appreciate the importance of making a Will. A Will is an essential means of ensuring that your assets are distributed in accordance with your wishes after your day, giving you peace of mind that you have made proper provision for all those people you feel should benefit.

You also get to choose the executors and trustees who will look after your affairs and if you have children under the age of 16, you can appoint guardians to take care of them in your absence. If you do not write a Will, your Estate will be distributed in accordance with the rules of Intestacy set out by law, unfortunately these are not always fair or tax efficient. For instance, where there is a spouse and children remaining, the spouse will only be entitled to the personal chattels, a fixed amount of £125,000 and a life interest in one half of the residue of the Estate. The children would be entitled to the other half of the residue as soon they reach 18 or if earlier, when they get married. Financial problems may arise as a result of this distribution method for the surviving spouse and they may not be able to enjoy the same standard of living as before. Writing a Will also gives the opportunity to plan the distribution of your assets in a tax efficient manner particularly with regards to Inheritance Tax.

How we can help……….

David Allen & Co can help you to plan for the future by reviewing your position and recommending a plan of action to reduce any looming tax liabilities. In addition to this we have a specialist in house Will writing department.

If you would like more information on this aspect of our services, please contact us on 01228 711888, email on info@david-allen.co.uk or visit our website at www.david-allen.co.uk