Letting your heir down?
Britons are ignoring estate planning tools that could help them to pass on more of their estate to the next generation.
Over recent years, property infl ation and rising asset values have combined to push a higher proportion of estates over the nil-rate band for Inheritance Tax (IHT).1
a tax just for the rich – or even moderately wealthy.
Despite the fact that more estates are paying IHT, there are ways to prevent families paying over the odds. For example, those with suffi cient assets to trigger an IHT liability when they pass away could use the exemption which allows anyone to give away £3,000 worth of gifts each tax year without them being included in the value of their estate.
However, according to a recent survey by Canada Life, only a fi fth of respondents aged 45 or over with assets worth more than £325,000 said they had gifted money, which could result in their families paying more IHT than they need to.3
Another way to minimise the impact of IHT is to take out a ‘whole of life’ insurance policy. This pays a lump sum on death, and when the policy is written in trust, the pay-out can help offset or eliminate an IHT bill. Yet nearly three quarters of those with a potential IHT liability said in the Canada Life study that they didn’t see a need to use life insurance, indicating an acute lack of understanding.4
Heir care
Whilst inertia and ignorance of estate planning is good news for the Treasury, which relies on it to ensure its tax receipts, the widespread lack of knowledge will worry many potential heirs. But taking the appropriate advice can go a long way to alleviating those concerns.
Canada Life, September 2016; survey of 1,001 UK consumers aged 45 or over with total assets exceeding the individual Inheritance Tax threshold (nil-rate band) of £325,000
1,2 3,4
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The new residence nil-rate band will help to a degree, but with the IHT threshold frozen at £325,000 per individual until at least 2021, and government receipts growing by a fi fth in the last year2
, IHT is not
A fi nancial adviser can help families with the transfer of wealth in an orderly and tax-effi cient manner, establishing trusts, life insurance and so on, while also ensuring that the person who is arranging their estate has enough income to maintain their normal standard of living.
With the right advice, more estates could be removed from the grip of IHT and bereaved families could be spared the extra heartache of paying unnecessary tax.
“There is a strong relationship between the lack of understanding of simple estate planning tools by the wealthy and the lack of take-up of fi nancial advice,” says Karen Stacey, Head of Technical Services at Canada Life.
“There is a perception that planning is too complicated and time-consuming, which is not the case. Writing a will is an absolute must, while gifting money is incredibly simple. Even options seen as complicated, such as setting up a trust, can be very simple when consumers know who they want to benefi t from their estate and get advice from a professional on how to achieve their objectives,” she says.
Please visit my website or contact me to receive a complimentary guide covering Wealth Management, Retirement Planning or Inheritance Tax Planning.
Scott Symes
APFS DipPFS DipFA CeMap Chartered Financial Planner
01202 951227 07885 899742
scott.symes@
sjpp.co.uk www.scottsymeswm.co.uk
HMRC, 29 July 2016
24 Story Lane, Broadstone BH18 8EQ
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