ASK THE EXPERTS

CATHERINE MCMANUS OF WYLIE & BISSET

WHAT IS THE BEST AGE TO SET UP AN INHERITANCE TAX (IHT) PLANNING STRATEGY?

ANSWER:

As with many areas of taxation there is no ‘one size fits all’ approach to IHT planning. Individuals with significant assets and associated high levels of IHT exposure must choose a time in their lives when they feel comfortable with what IHT planning might mean for them as it can involve giving up rights over assets or a change in their traditional asset holding strategy.

Giving away assets in life can be a challenge, not only because it often results in the loss of income producing assets for the individual, but they can also lose control over how the assets are managed. The threat of an unscrupulous third party influencing the recipient of an asset transfer looms large over many families leading to unease and conflict. This coupled with those who see themselves as ‘too young’ to be thinking about death and taxes can lead to individuals leaving it too late to influence their IHT liability.

The earlier individuals face up to what their IHT exposure might be the better in terms of addressing what onward planning strategies will work for them.

Five key tips:

1. Instruct a specialist adviser to review what the latent IHT exposure is and keep this under regular review as it will change over time.

2. Have the adviser recommend IHT mitigation strategies tailored to the individual’s needs taking account of stage in life, family circumstances and future objectives.

3. Where planning recommendations involve tax efficient investments make sure there is liaison with an Independent Financial Adviser to assess risk profiles and to ensure the investment strategy is not driven by a tax solution only.

4. Make sure Wills are up to date.

5. Don’t leave it too late in life as death bed planning has its limitations.

If implemented, individuals can gain comfort that they have put their affairs in order.