Saving Inheritance Tax

More and more people are becoming liable to pay Inheritance Tax on their estates when they die, especially due to the recent increase in property prices.  Your estate includes your main residence, any second property, any cash savings and investments you may have, cars, boats, personal effects (jewellery for example) and the value of your life assurance policies.  If the total value of your estate is over the Nil Rate Band ('NRB'), inheritance tax of 40% will become payable on the excess amount.

We can help you consider whether inheritance tax measures need to be taken when making your Will, in order to reduce any tax liability upon your death.

Once possibility is to make certain transfers during your lifetime to reduce the size of your estate, such as:

• Lifetime transfers can be exempt from inheritance tax if:
  • Small gifts of up to £250 per year to any one person
  • The first £3,000 of transfers made by an individual in any one tax year (any unused annual exemption can be carried forward)
  • Gifts to charities
• Potentially Exempt Transfers – these will be exempt from Inheritance Tax as long as the person making the transfer does not die within seven years of the date when the transfer was made.

Since 2007, any portion of the 'NRB' that has been unused when a spouse or civil partner dies, can be transferred to the surviving spouse when calculating the Inheritance Tax liability upon their death.

Careful tax planning for married couples or civil partners can ensure that they make the most of their exemptions and options available include creating discretionary trusts into which a legacy equivalent to the initial Nil Rate Band amount is gifted so the surviving spouse has the use or income from the assets contained within the Trust during their lifetime.

Inheritance Tax planning involves complex considerations so let our experts advise you in making the best arrangements for your loved ones.