Inheritance tax

Record numbers of families are dealing with the difficult consequences of inheritance tax, but it does not have to be this way for your loved ones.

Whatever the future holds, it can be reassuring to know that the people who matter most will be looked after. Yet the unfortunate reality is thousands of families are being left with the burden of a 40 per cent inheritance tax bill when a loved one dies. It can cause major headaches over finding the money to pay it, and reduce the amount of inheritance they ultimately receive. In the 2015/16 tax year, an average of 109 families had to pay inheritance tax every single day. The amount of estates triggering a tax bill has more than doubled in just six years. Even with new rules coming into force this year, aimed at reducing the amount of families liable, annual tax receipts are expected to continue to rise.

Help is available

Recognising inheritance tax is a growing problem for our readers. Mail Finance has chosen Skipton Building Society to provide you with personalised financial advice. They have advisers based all over the UK, who can help you to determine if your estate might give rise to an inheritance tax liability. There are a number of solutions available, especially if you act sooner rather than later. Skipton will never pressure you into acting on their recommendations. You can take as long as you need to decide your next steps.

How to address the problem

When Mr and Mrs Rawson, from Lancashire, identified their estate was liable for inheritance tax, they spoke to Skipton for financial advice and arranged to meet with their local adviser. Mrs Rawson explained: “My husband sold shares in a business, for which he was the founder chairman of, from which he got quite a lot of money. We didn’t know much about inheritance tax at all, but we wanted to see if there was any way we could prevent our children from having to pay a large bill. It was very important to us to put plans in place.” After considering the couple’s circumstances, their financial adviser recommended they set up trust funds for their children that would help address their inheritance tax liability. The advantage of gifting money into a trust is that, after seven years, it’s no longer classed as part of your estate for inheritance tax purposes – plus any growth will belong to the trust and not form part of your estate. In the meantime, you can choose to be a trustee and retain some control over how the money is used. One disadvantage of this approach is that you are giving up access to this capital and any future growth it achieves. In other words, you can’t use this money for your own needs. There can also be a level of investment risk involved. Mrs Rawson added: “Our adviser sorted everything out for us – the whole process was straightforward.” These plans were set up a few years ago, and Skipton has continued to provide the Rawsons’ with advice on their finances, including keeping their inheritance tax provisions under review. “With Skipton, it’s always a trustworthy experience,” Mrs Rawson concluded. “Our financial adviser Matthew is very professional. He knows what he is talking about, and we trust him to do the best for us.” It is important to be aware that some IHT planning solutions may put your capital at risk – so you may get back less than you originally invested. Some areas of IHT planning are not regulated by the Financial Conduct Authority.

“We wanted to see if there was any way we could prevent our children from having to pay a large bill. It was very important to us to put plans in place.”