Making your family’s inheritance as certain as it can be
Steve Green Tax Director Trident Tax
In a letter in 1789, Benjamin Franklin used the famous phrase ‘In this world nothing can be said to be certain, except death and taxes’. We accept the likes of income tax and capital gains tax throughout our working lives, mitigating these when we can, yet many businesspeople ignore the tax that is, in fact, arguably the most punitive of them all – Inheritance Tax, or IHT. This is where Franklin’s death and taxes are
inextricably linked, and, understandably, it’s an area that can be diffi cult to think about, talk about or plan for. Most businesspeople will be able to tell you
that IHT is around 40% and that, due to a relatively new residence nil rate band, the ‘IHT free’ limit of an estate is £1m per couple (unless the estate is over £2m when the residence nil rate band starts to disappear). T at sounds high, but what we are seeing, given ever-increasing property prices, is
that more people are coming into the scope of IHT. Couples who bought a standard family home on a fairly modest mortgage 30 or 40 years ago may well fi nd that the house is worth close to £1m, taking the estate value over the IHT threshold. T ere are, of course, with careful planning, ways
to reduce IHT liability and while I outline the funda- mental courses of action here, it is important to seek professional tax advice about this complex area of tax before making any decisions about the passing on of assets and wealth.
Wills Before we go any further, having a will is one of the most important aspects of passing on your assets. Having a will avoids any uncertainty as to how your assets will be distributed and will reduce the chances of conflict among your heirs, avoid delays in your assets being distributed and reduce problems in relation to more complex areas such as overseas assets.
Gifts of assets Gifts to other individuals are often ‘potentially exempt transfers’ meaning they are exempt from IHT if you survive seven years from the date of the gift, and are charged at tapered rates if you die before then.
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