Hindle & Jepson Financial Services Ltd

Inheritance Tax - Who Will Be Your Main Beneficiary?

Inheritance Tax

Investments/ISA's/PEP's

Pension Planning & Retirement Solutions

Mortgage Solutions

Life Assurance/Critical Illness/Income Protection

Savings

Insurance

Inheritance Tax is a tax that is levied upon your estate when you die and pass your assets onto your beneficiaries.

Transfers to your spouse/civil partner "spouse" are exempt, and so, for the vast majority of people, IHT is a tax levied on the death of the longest-living spouse.

It is calculated by working out the value of your entire world-wide assets if you are UK domiciled, and then levying tax as follows ( for 2008/09):-

First £0-312,000 - Nil Rate Band (no inheritance tax)
Over £312,000 - 40%

It is the responsibility of your surviving relatives to pay any inheritance tax, and it can often be the case that assets have to be sold by your estate in order to meet any tax liability.

Consideration should also be given to any business assets you may own.

The Most Common Inheritance Tax Mitigation Technique Often Doesn’t Work - Gifting Assets Away

Whilst retaining all or some of the benefit of such items. This is not a true gift and is therefore not effective for inheritance tax purposes.

New Inheritance Tax Legislation

Recent changes to inheritance tax rules mean that the majority of estates will now not pay inheritance tax. The changes mean that you can now roll over any unused allowance to the surviving spouse.

Example 1
Mr A died in 1996 (allowance £200,000) and left all his estate to his wife. Mrs A dies this year (allowance £312,000) and leaves all her estate to their only son. The amount Mrs A can leave to their son before inheritance tax is payable, is therefore £624,000.

Example 2
Mr A died in 1996 (allowance £200,000) but this time left £100,000 to their son, with the remainder passing on to his wife. Mrs A dies this year leaving all her estate to their son. However, as Mr A gifted 50% of his allowance to their son in 1996, Mrs A can now only carry forward the remaining unused 50%. Mrs A will now only be able to leave £468,000 (£312,000 + £156,000) before inheritance tax becomes payable.

Complex Estates

These should be reviewed carefully and periodically. Solutions may often include:

Giving assets away absolutely whilst alive, be it to Trusts, Charities, friends or family.
Providing for the anticipated tax liability by means of life insurance.
Products may be available from insurance companies that can allow you to have some benefit from your assets, whilst at the same time placing them outside your estate.

If you have an estate for which inheritance tax may be an issue, it is important to seek advice and plan in advance. We will be happy to assist you in this.