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Estate planning

Finding ways to pass on your wealth that are right for you and your family

Finding ways to pass on your wealth that are right for you and your family

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Inheritance tax and family wealth

Whatever assets or wealth you have accumulated in life, you will have your own personal plans for how your legacy is shared with those you care about.

Making sure that your estate is passed on fairly and is not diminished by ineffective inheritance tax planning is a really important task. It can appear complex. And it’s true there may be a lot to consider.

That’s why it’s so helpful to work with an adviser who understands what’s involved – as well as the implications of any decisions you make, so that your affairs are structured in line with your plans and wishes.

Inheritance tax & family wealth

When you add everything together you may find that your estate is larger than you think. Everything you own forms part of your estate and includes:

  • Money (both cash and money in a bank or building society account);
  • Money owed to you;
  • Investments
  • Life insurance pay outs
  • Property
  • Personal possessions, such as your car.

If you have any debts when you die, the amount that needs to be repaid will come out of your estate.

HMRC received £5.2 billion in inheritance tax receipts during 2019–20* - not surprising as Inheritance Tax is one of the most complex areas of financial planning and the rules change frequently.

Keeping your plans up to date with the current regulation is important and the sooner you have a plan in place, the more options you’ll have for passing on your wealth efficiently. Working together, we’ll help you find ways to preserve what you have for future generations to enjoy.

* www.gov.uk/government/statistics/inheritance-tax-statistics-commentary

When it comes to developing your plan, we’ll always look for the most straightforward options from the many that are available, according to your personal situation and needs.

Gifts. You can gift money directly or to a trust or family investment company. Providing you live for seven years, anyone who receives the gift will not have to pay IHT.

Exemptions. You’re entitled to several allowances, which means gifts to friends and family under a specific amount are tax free – including donations to charities and political parties. If you leave more than 10% of your estate to charity, your IHT rate falls to 36%.

Reliefs. Some assets are exempt from IHT or are at least eligible for a reduced rate. They include certain types of businesses, agricultural and woodland property, and heritage assets (a building, land, or objects of national scientific, historic or artistic importance).

Insurance. You could make it easier for your family to pay their IHT bill by taking out a life insurance policy to cover it. Make sure the pay-out goes into trust – if you don’t it will make your estate bigger and increase the tax liability.

Pension. money held in your pension will normally be exempt from IHT, making this a valuable way to pass wealth to future generations.

A trust can help you keep control of what happens to your assets after you die. It’s a legal arrangement where you give your assets to someone (a trustee) so they can look after them for your loved ones (the beneficiaries). You can specify when the beneficiaries can access the trust – for example, you might allow your children to access the trust when they turn 25.

Assets in trust don’t normally form part of your estate, so they won’t be included when working out how much IHT is due, providing you live for seven years after placing them into the trust. However, there are various types available and the rules around them are complex, so it’s important to speak to an expert before you go ahead. Our advisers can help you assess your options and decide on the best course of action for your circumstances.

The most important step in shaping how your assets will be shared, a will is the blueprint for working out what you’d like to happen.

It’s crucial to write one and keep it up to date to avoid potentially costly and time-consuming problems for your family after you die.

Your will can be more than a list of instructions. For example, it’s becoming increasingly popular for people to include information about the origins of their family’s wealth. A written story or video can help to reconcile your values with the way the rest of your family thinks about money, as well as feelings of fairness and recognition.

You will need to speak to a solicitor or Will writing specialist.

Will writing is not regulated by the Financial Conduct Authority

Our inheritance tax calculator allows you to find out your approximate IHT liability based on the current value of your estate, which takes into account property, investments and cash, alongside the number of Nil Rate bands you are entitled to.

For more information, or to discuss ways to help minimise the impact of IHT on your beneficiaries, please speak to your financial adviser.

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Investment caveat

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.