Weston Financial Partnership Limited

EFFECTIVE IHT PLANNING

With the long awaited Finance Act finally gaining Royal Assent the focus is now firmly on how to plan for Inheritance Tax (IHT) effectively.

For those who have yet to undertake any planning, or for those who already have plans in place, it is important to work with an Independent Financial Adviser to understand and review IHT arrangements and ensure that they are up to date with current legislation and Inland Revenue limits.

• Make a will and if you have a will, review it – Dying intestate creates many problems and does not necessarily leave assets to those you intend. Whilst a will does not in itself save IHT, it is the cornerstone of an effective strategy

• Make use of various IHT exemptions – There are a number of allowances and exemptions available to help individuals mitigate the burden of IHT. All individuals have an allowance of £3,000 pa and there is a small gifts exemption allowing up to £250 to be given to any individual each year

• Check existing life assurance policies – any existing life assurance policies should ideally be written under an appropriate trust to avoid the value being included in your assets subject to IHT. Consider also making use of a suitable life assurance policy to provide funds to meet any IHT liability on death

• Surplus assets – consider gifting away surplus assets to beneficiaries now. There are many ways in which this can be done and it is important to take independent advice as to which would be most efficient for individual circumstances

• Surplus income – if your income exceeds your outgoings then consider making regular gifts out of income; structured correctly this can give full relief from IHT

• Trust Assets – if you are a beneficiary under a trust and do not require the benefit then consider disclaiming yourself as a beneficiary. It may well be possible to do this without significant tax implications and the value of benefits will no longer form part of your estate subject to IHT

• Downsizing – if children have flown the nest then it may not make sense to stay in a large family home. People who downsize can then gift a lump sum to children and make use of other forms of IHT planning

• Consider whether assets qualify for relief – there are a number of tax reliefs available for assets that qualify as either agricultural property or business property. Relief from IHT can be available at up to 100%

• Make use of packaged arrangements – there are many schemes available which can help to mitigate IHT. These can be structured to allow some degree of access to capital and/or income and are typically written in conjunction with a life assurance plan. Independent advice should be taken when considering these arrangements