Welcome to Inheritance Tax Review, a team of Independent Financial Advisers and Inheritance Tax Specialists dedicated to helping people reduce their inheritance tax liability.
Our team of specialists work across the UK and have been recognised through various awards, including the Money Marketing Inheritance Tax Planner of the Year 2010. We run Inheritance Tax seminars to help clients understand their potential tax bill and offer solutions to avoid paying more than necessary.
There are various factors which should be taken into account when considering inheritance tax / estate planning. If incorrect or illegal advice is provided then your estate may be liable to a large tax bill so it is very important to make sure you take suitable advice from an independent and fully qualified individual.
Inheritance Tax Review are independent advisers who work for a Chartered financial advice company called AISA Professional ( www.aisapro.co.uk) - regulated by the FSA.
Who pays Inheritance tax and when is it due?
Inheritance tax must be paid if an estate is worth over £325,000 (the current ‘nil rate band’), including all assets such as property, investments, chattels and gifts or trusts set up within the seven years before death. The tax is 40% on all assets over this £325,000 threshold. Therefore if a single person dies with an estate of £500,000 then there would be a tax bill of £70,000 due within 6 months of passing away (£500,000 minus current nil rate band of £325,000 is £175,000 taxed at 40% is £70,000). If the majority of this £500,000 is the value of a property then this may need to be sold in order to pay this tax bill. If the property is a family home which has been passed down through generations then this could cause considerable upset.
Since 2007 married couples and civil partners can use their joint nil rate band on second death, which means they are assessed on inheritance tax liability with a nil rate band of £650,000 after both partners have passed away. Their personal representatives or executors must transfer the first spouse’s unused Inheritance Tax threshold (nil rate band) to the second spouse when they die.
Inheritance Tax is payable by different people depending on the specific circumstances. Usually the executor or personal representative pay it using funds from the deceased’s estate. The trustees are usually responsible for paying Inheritance Tax on assets in, or transferred into, a trust. If a gift was made in the past seven years before death then the value of this gift would probably form part of the estate, subject to a potential ‘taper relief’ depending on when the gift was made. Sometimes the person who has received the gift will be asked to pay the appropriate Inheritance Tax due, but this is not common.
Exemptions and reliefs
Some assets can be passed on without forming part of your estate liable to Inheritance Tax. These include any assets passed to a spouse during your lifetime, payments made to charity and gifts made over 7 years prior to passing away. You are also able to make gifts of £3,000 each year, known as an annual exemption. You can make small gifts up to £250 to as many people as you like, a wedding gift of £5,000 or make payments out of regular expenditure with no liability to tax. There is also relief available for owners of businesses, farms, woodland and National Heritage property, but each situation should be assessed to ensure the property qualifies.
Making gifts in order to reduce an inheritance tax liability should only be done if the donor is sure that they have enough income and capital from other sources in order to sustain their retirement needs. Giving away assets may cause other problems in the event of divorce, bankruptcy or even if the person dies after receiving the gift it may then form part of their estate, aswell as the donors estate and therefore be taxed twice.
Some people believe it is possible to give away your home but continue to live in it and therefore avoid it forming part of your estate for Inheritance Tax purposes. This is incorrect and the home would be taken into account for inheritance tax when you die along with other taxes such as income tax. Even paying an ongoing rent to the new owners while living in the home would not necessarily avoid it being classes as a ‘gift with reservation of benefit’ and therefore not exempt from inheritance tax.
What options are available?
There are various Estate Planning solutions to consider when assessing your liability to Inheritance Tax, but strategies can vary significantly depending on your overall estate, age, access to capital, need for immediate income, future income requirements and so on. No two solutions are the same and for this reason you should seek professional advice to ensure the correct strategy is implemented.
As an example, here are some of the options which could be considered:
- A gift into trust for the benefit of your family. This would take 7 years to be considered completely outside your estate and would mean you give up access to the capital and income.
- A gift and loan trust arrangement. An example of this type of arrangement you make a small gift of £10 and then loan the trustees a much larger sum. This arrangement is more suitable if you want to take regular repayments of the loan to supplement your income.
- Discounted gift trust. With this arrangement you take out a life assurance bond which you gift into trust. You retain the right to a regular fixed withdrawal on a regular basis. An assessment is made as to the income you should receive, based on your life expectancy, and a ‘discount’ is offered so that you would see a reduced Inheritance Tax liability if you were to pass away in the first seven years.
- Maturing policies in trust. This allows you to gift money into trust for your chosen beneficiaries whilst retaining the right to periodic maturity proceeds. Should you not require the maturity proceeds your trustees can extend the maturity date. The value of your original gift into trust is outside your estate after seven years, whilst any investment growth is outside your estate from day one.
- Loan Trust, which would allow access to the original capital but place all future growth outside your estate.
- It is possible to place an asset outside your estate after just 2 years using Business Property Relief. This method can be done with a low risk structure and could allow access to the capital in future as the money would not have to be placed in Trust for the benefit of somebody else.
These are just a few examples as there are many options which people consider and a combination of these may form the best strategy for some people. The importance of making a Will should not be overlooked and this is something that is always considered at the same time as your Inheritance Tax strategy.
Inheritance tax is not something which should be ignored or put off to a later date as in many cases the strategy needs a few years before it will achieve its objectives. The sooner you assess your options then the more chance your family has of reducing their tax bill and potentially avoiding serious problems when an estate goes through probate.
What can Inheritance Tax Review do to help?
We are a team of Independent Financial Advisers who specialise in Inheritance Tax solutions. Our aim is to assist clients to review their liability to estate tax and then review the most appropriate strategy. All advice is fully compliant with UK legislation and regulated by the FSA.
To speak to one of our professionals please contact Inheritance Tax Review.
Inheritance Tax Review offer an initial consultation phone call with an Independent Financial Adviser to discuss your situation.
Please contact us to book in an appropriate time.
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Review your Inheritance Tax liability and assess the options available
- Our independent financial advisers offer an initial consultation to assess any potential inheritance tax which you family will have to pay.
- An Inheritance Tax strategy should be put in place as early as possible as many options take at least 2 years before they achieve their objectives.
Why use Inheritance Tax Review?
- Our advisers are highly qualified independent financial professionals who have been awarded Inheritance Tax planner of the year 2010 and work for a Chartered Financial planning firm.
- We aim to use plain English when talking about Inheritance Tax strategy as some terms can be very complicated. Our advisers will look to make sure you fully understand your situation and the potential solution.
- Our team are based all over the UK and can meet with clients at their home address or at our various offices.
- We can work on a fee or commission basis in order to cover the cost of our advice and any ongoing servicing.
For more information and to book an initial phone consultation with a professional adviser please contact us on 0843 317 9569 0843 3179569