Inheritance Tax Planning

Inheritance Tax Planning 2017-10-07T13:10:28+00:00

Inheritance Tax Planning

Inheritance Tax (“IHT”)

IHT is a tax that is payable on death of an individual at a rate of 40% on the value of their net estate that exceeds £325,000. Therefore, as an example, if the net estate (assets less liabilities and funeral expenses) is £400,000 the IHT payable could be £30,000.

There are a limited number of potential exemptions and IHT reliefs that can reduce the amount of IHT payable.

Examples are:

1. Spouse exemption of a full 100% on the first death if one spouse dies passing the estate in full to the surviving (UK domiciled) spouse.

2. On the surviving spouse’s death there is also a potential doubling-up of the £325,000 IHT allowance so potentially increasing the IHT threshold to £650,000. PLEASE NOTE: This has been designated by Government to increase further due to the Residence Nil-Rate Band (RNRB) up to a value of £1m dependent on a number of factors and further dependent on any future legislation amendment.

An estate will be entitled to the RNRB if:

  • the individual dies on or after 6 April 2017;
  • the individual owns a home, or a share of one, so that it’s included in their estate;
  • the individual’s direct descendants such as children or grandchildren inherit the home, or a share of it; and
  • value of the estate isn’t more than £2 million.

An estate will also be entitled to the RNRB when an individual has downsized to a less valuable home or sold or given away their home after 7 July 2015.

The maximum available amount of the RNRB will increase yearly .

For deaths in the following tax years it will be:

  • £100,000 in 2017 to 2018
  • £125,000 in 2018 to 2019
  • £150,000 in 2019 to 2020
  • £175,000 in 2020 to 2021

For later years, the maximum RNRB will increase in line with inflation (based on the Consumer Prices Index).

Any unused RNRB when someone dies can be transferred to the deceased’s spouse or civil partner’s estate. This can also be done if the first of the couple died before 6 April 2017, even though the RNRB wasn’t available at that time.

For estates valued at more than £2 million, the RNRB (and any transferred RNRB) will be gradually withdrawn or tapered away.

3. Gifts to UK registered charities attract automatic IHT exemption and there are certain circumstances where the IHT threshold can be reduced from 40% to 36% depending on the amount of charitable gifts made in a Will.

4. Business property, assets and shareholdings attract Business Property Relief and qualify for either a 100% or 50% exemption.

5. Agricultural land and business assets qualify for either a 100% or 50% exemption.

1. Simply, reducing the value of your Estate by giving it away or spending it! You will generally need to survive 7 years from the date of making a gift for it to be excluded from your Estate assets for IHT purposes.

2. If you are benefiting from a substantial income and if you are not spending that income, you can make regular gifts to others out of your surplus income without triggering the 7-year rule.

You can give away £3000 per year of capital without triggering the 7-year rule. You can make small other gifts for weddings, anniversaries etc. We can supply the details.

3. You can invest assets in financial products such as the AIM market or other innovative structures such as Business Property Relief assets which assets can be excluded from your estate after 2 years of ownership. Such structures carry risks and costs and, as solicitors, we can only advise you generally on the same and would have to recommend you to a specialist independent financial advisor.

4. For persons inheriting assets, a Deed of Variation can be executed by the recipient to receive the asset via a Discretionary Trust as a lifetime loan or alternatively if the assets being received are not required by the beneficiary, they can be held in trust or advanced down to other beneficiaries, so avoiding the Estate of the beneficiary.

5. Using Trusts in Wills to protect IHT for your beneficiaries’ estates: see our section on the use of Family Trusts. By using Trust structures in your Wills, IHT can be reduced for subsequent estates such as those of your spouse’s Estate and the Estates of your future generations. Trusts require legal explanation and guidance and that is why IHT planning using Trusts is a speciality of this firm.

We have a strong team dedicated to Estate and tax planning (see below).

If you would like us to review your IHT position and to advise on steps you can take, we invite you to have an initial discussion or appointment with one of the lawyers from our private client team.

If a personal appointment is not convenient for you, we can arrange a discussion on the telephone and provide a set of notes or written advice.

Our team

Johanna Knott: an experienced solicitor and a member of the Society for Trust and Estate Practitioners and Solicitors for the Elderly. Contact Johanna at jo@cartmell-solicitors.co.uk. Johanna is based at our office in Chalfont St Giles and is a local resident.

Helen MacDiarmid: an legal executive with years of experience in handling a wide variety of Power of Attorney, Probate and Wills related matters. She is also a member of Solicitors for the Elderly. Contact Helen at helen@cartmell-solicitors.co.uk. Helen is based at our office in Chalfont St Giles.

Jennifer Beaujeux: an experienced legal executive with very sound knowledge in advising clients on all aspects of Power of Attorney, Probate and Wills related matters. Contact Jennifer at jennifer@cartmell-solicitors.co.uk. Jennifer is based at both our Chalfont St Giles office and our Stone office.

Robert Cartmell: an experienced specialist Solicitor having conducted Wills, Probate, Lasting Powers of Attorney and Court of Protection matters over an 18-year period for individuals and couples. He is a professional member of the Solicitors for the Elderly. He is currently appointed Deputy or Trustee on a number of matters. Contact Robert at rob@cartmell-solicitors.co.uk. Robert is based at both our Chalfont St Giles office and our Stone office.

Contact us

To discuss IHT planning or to make an appointment with a member of our legal team
Tel: 01494 870075 (Chalfont office) or 01296 747151 (Stone office)

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Our accreditations

Law Society Conveyancing

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