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Estate Planning

Estate planning is all about making sure your wishes are followed, and minimising the amount of taxes due on your estate after you die. Putting your savings, investments, life policies or assets into a trust can play an important part in estate planning.

After a lifetime of hard work, you want to make sure you protect as much of your wealth as possible and pass it onto the right people.

However, this does not happen automatically. If you do not plan for what happens to your assets when you die, more of your estate than necessary could be exposed to inheritance tax (IHT). You want to be sure that the right people will get the right amounts at the right time – and that they are ready to receive potentially large sums.

Who is liable for inheritance tax?

Currently, IHT is charged at 40% on all that you own over £325,000. Your estate can pass tax free to your spouse or civil partner when you die. This can mean a joint allowance of £650,000.

The family home allowance

From April 2017 the Government is introducing a new, additional tax-free allowance for people who own a home. This is called the ‘family home allowance’. It will be gradually phased in and will eventually be worth an additional £175,000 per person. Combined with the £325,000 allowance we each already receive this means a new allowance for property owners of £500,000 – or £1m for couples.

However, when you consider the value of your home and possibly other properties, as well as savings and investments, this allowance can soon be used up.

How can estate planning help?

Estate planning is about more than just tax. It is about making sure the people left behind are financially supported, that your assets are protected, and that the tax your estate pays is fair.

From essential estate planning, such as the establishment of wills and power of attorney, to options such as making the most of exemptions, giving away excess income and creating trusts, there are numerous estate planning possibilities.

Everyone has different requirements and motivations – the right solutions for you are the ones that suit your personal circumstances. We can work with you to discover what these are.

Our estate planning service

  • specialist estate planning advice is designed to help you maximise your wealth and minimise IHT.
  • A comprehensive review of all your assets and objectives
  • Plans designed specifically for you and your estate
  • A wide choice of tax-efficient solutions

Inheritance Tax Understand how inheritance tax works and what effect IHT could have on your estate

IHT is affecting more people than ever – HMRC has forecast it will receive around £21 billion in IHT between 2014 and 2018.

Currently, IHT is charged at 40% on all that you own over a threshold of £325,000. This threshold is called the nil-rate band. The tax rate is reducedto 36% if you leave 10% or more of your estate to charity.

Your estate, including any gifts made by you, can pass tax-free to a spouse or civil partner living in the UK. This can give you a joint allowance of £650,000.

Changes to inheritance tax

The inheritance tax rules are changing. From April 6, 2017, a family home allowance, which will gradually increase to £175,000 by 2020-2021, will be added to the £325,000. So the eventual inheritance tax-free total for married couples and civil partners could be as much as £1million.

The family home allowance only applies when your main residence is passed to your direct descendants. However, if you downsize before you die you will not necessarily miss out as, you may be eligible for an inheritance tax credit, again provided that you leave most of your estate to direct descendants. More details on this are awaited.

If your whole estate is worth more than £2m however, the additional allowance will taper away.

Inheritance tax exemptions

There are certain gifts that get favorable IHT treatment:

  • Charitable gifts made to a qualifying charity during your lifetime or in your will
  • Potential exempt transfers (PET). If you survive for 7 years after making a gift to someone, that gift is generally exempt from IHT
  • Annual exemption – you can give away up to £3,000 each year, and you can use your unused allowance from the previous year
  • Small gifts – you can make small gifts up to £250 to as many people as you like tax free
  • Weddings and civil partnership gifts are exempt up to a certain amount
  • Regular gifts from surplus income after tax – these need to be documented and lead to no reduction in standard of living for you as donor

Business property relief

Shares held in the portfolios of qualifying companies are considered business assets and attract 100% relief from IHT.

This type of IHT relief is available to investors who have held shares in a qualifying company for at least two years. Qualifying companies include most of those trading on the Alternative Investment Market (AIM). There are additional risks with investing, but our estate planning specialists will guide you through the options available.

Mitigating inheritance tax

How you tackle inheritance tax will depend on factors like your health, your age and how quickly you want to achieve tax savings. At all times your personal situation is of paramount importance to us – your needs come first.

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