How well are you managing your Inheritance tax (IHT) estate?

Your first task should be to know your numbers, put a value of your net estate, which in short is your total assets less liabilities. It sound straightforward but what should you include, or exclude?

Certain assets like capital in pension funds, life assurance policies that pay out in trust rather than in to your estate, or if you are a potential beneficiary of a discretionary trust should be excluded. There may be assets that you need to include in the calculation such as being a beneficiary of a life interest trust, or if you have made certain lifetime gifts during the past seven years as they will need to be added back.

You should be aware of what are chargeable assets and which may be exempt from IHT. The point here is, valuing your estate may not be as simple as you think. Get it wrong and it could cost you (or your family to be more specific) and no I am not making any of this up, it is how the rules have evolved over time.

The second task is to know what tax allowances and exemptions can be set against your estate to see if you have a chargeable estate, or not. Then you can decide how to manage your way out of the problem, this is why IHT is often labeled a voluntary tax. Do nothing about it and you are volunteering to pay it, put a strategy in place and you can manage your way out of it. Talk to us if you would like to know how to do this.

Everyone has a Nil Rate Band allowance (currently 325,000 in 2018/19) to set against their estate. There is also a Residence Nil Rate Band allowance available (currently 125,000 000 in 2018/19) and the rules around being able to claim it are far too complicated to explain here. If you are married or in a civil partnership, survivorship rules (i.e. all to the survivor) will mean there is no IHT on first death but there could be on second death. If you are an unmarried couple IHT could be payable on first death and second death, so getting married for tax purposes is a solution and is more common than you might think!

 You may have read that Inheritance Tax receipts hit a record high of 5.2bn in the last tax year. One contributor to this is where family or lay executors deal with the estate of the deceased and are either unaware or incapable of knowing how to claim the allowances or exemptions that are available. You have to claim them. Estate administration is a complicated process and when done professionally can easily pay for itself in such circumstances, and if you know where to go for a trusted reliable service where the cost is fixed and agreed upfront, you will be able to rest easy knowing that this has been dealt with in the best possible way, we can of course help.

We comply with the Institute of Professional Willwriters code of practice, and that of the Society of Trust & Estate Practitioners, in England and Wales.


Thanks for reading! As always, if you think we can help you please contact us.

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