Put your Trust in the future for sake of next generation
BECAUSE so few people take steps to reduce its impact, Inheritance Tax (IHT) is widely regarded as a form of voluntary tax. The Nil Rate band has been at its current rate of £325,000 since 2010 and is frozen at this level until 2017.
Whether the result of the General Election will change that, only time will tell.
The IHT chargeable rate is 40 per cent on the value above the Nil Rate Band.
“Some changes have been made in recent years,” says Keith Miller of Capital Managers.
“For example, the Nil Rate band has become transferrable between spouses on death, which means that a married couple can enjoy a potential doubling of the Nil Rate Band.
“Prior to this a couple needed a level of liquidity and the use of a will trust, but thankfully new legislation has brought in a much simpler system.
“IHT planning is not just about reducing the impact of IHT on your estate – it is about ensuring the right people receive your assets once you’re gone.
“There are two distinct methods of reducing IHT’s impact. You can either arrange your affairs to minimise the effect of IHT or alternatively you can make arrangements to fund the IHT bill, ensuring that it is paid and the remaining estate is passed to your beneficiaries. For many, a combination of both can be a sensible solution.
“Rather than making gifts outright, the use of trusts can be successful in ensuring that your wishes are adhered to during your lifetime and after death, creating a legacy for future generations.
“There are also a number of trust solutions.
“These allow people to set aside capital for future beneficiaries, whilst continuing to enjoy an income in their lifetime, which can be particularly important.
“Trusts often sound complicated, but are simply a means of creating a structure which can continue after your demise.
“A good solicitor can provide bespoke trusts, but for simple requirements there are some very useful ‘off the shelf’ trusts that run alongside investment solutions for clients.
“It is also becoming more common for people to gift assets to grandchildren and children during their lifetime. There are a number of annual exemptions and reliefs, and where these are used it makes sense to document them.
“For many, a good level of IHT planning can be achieved without the need for a drastic overhaul of their finances.”