Planning could save a family hundreds of thousands of pounds payable
Effective estate preservation planning could save a family a potential Inheritance Tax (IHT) bill amounting to hundreds of thousands of pounds. IHT planning has become more important than ever, following the Government’s decision to freeze the £325,000 lifetime exemption, with inflation eroding its value every year and subjecting more families to IHT.
Owning a residence which is left to direct descendants
The Inheritance Tax residence nil-rate band (RNRB) came into effect on 6 April 2017. The RNRB provides an additional nil-rate band where an individual dies on or after 6 April 2017, owning a residence which they leave to direct descendants. During the 2017/2018 tax year, the maximum RNRB available is £100,000. This rises in £25,000 increments in subsequent tax years until it reaches £175,000 in 2020/2021, after which it will be indexed in line with the Consumer Prices Index.
Potential implications of such gifts with regard to Inheritance Tax
Some people like to transfer some of their assets whilst they are alive – these are known as ‘lifetime transfers’. Whilst we are all free to do this whenever we want, it is important to be aware of the potential implications of such gifts with regard to Inheritance Tax. The two main types are potentially exempt transfers (PETs) and chargeable lifetime transfers (CLTs).
Failure to take action could compromise the long-term financial security of the family
If a person wants to be sure their wishes will be met after they die, then it’s important to have a Will. A Will is the only way to make sure savings and possessions forming an estate go to the people and causes that the person cares about. Unmarried partners, including same-sex couples who don’t have a registered civil partnership, have no right to inherit if there is no Will. One of the main reasons also for drawing up a Will is to mitigate a potential Inheritance Tax liability.
‘Ring-fencing’ assets to minimise or mitigate Inheritance Tax
Appropriate trusts can be used for minimising or mitigating Inheritance Tax estate taxes and can offer other benefits as part of an integrated and coordinated approach to managing wealth. A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Once the trust has been created, a person can use it to ‘ring-fence’ assets.
Taking control of decisions even in the event you can’t make them yourself
A lasting power of attorney (LPA) enables individuals to take control of decisions that affect them, even in the event that they can’t make those decisions for themselves. Without them, loved ones could be forced to endure a costly and lengthy process to obtain authority to act for an individual who has lost mental capacity.
Planning steps to consider when passing wealth in the most tax-efficient way
Whether you have earned your wealth, inherited it or made shrewd investments, you will want to ensure that as little of it as possible ends up in the hands of HM Revenue & Customs. With careful planning and professional financial advice, it is possible to take preventative action to either reduce or mitigate a persons beneficiaries’ Inheritance Tax (IHT) bill – or mitigate it altogether. These are some of the main areas to consider.
Cohabiting families risking their family’s financial future
The lifestyle of our loved ones may be seriously compromised if we die. However, very worryingly, more than 2.4 million cohabiting families across the UK – the fastest-growing family type in the country – do not have life insurance, potentially leaving their loved ones open to financial problems once they pass away, according to new analysis[1].
Will you be able to afford the retirement lifestyle you want?
If you’re still working, what kind of life would you like to lead when you’ve said goodbye to the 9-to-5? Saving for your retirement is essential if you want the financial freedom to enjoy your later years. After all, you’ll still want to do all the things you love now – and probably a few others too.
Ageing population faces significant funding crisis
As part of Budget 2017, Chancellor Philip Hammond announced an extra £2 billion of funding for social care and paved the way for major changes to how people pay for it. But people in the UK are still underestimating the cost of elderly care by £7 billion every year[1], according to new research from Scottish Widows’ independent think tank, the Centre for the Modern Family.
