Top 5 Inheritance Tax Planning Questions

Top 5 Inheritance Tax Planning Questions Everyone Should Consider 

Inheritance tax planning is a topic that many people put off thinking about, but a little planning at an early stage can make a big difference. With the right steps in place, you could end up paying less tax than you first thought leaving more of your estate to pass down to your family and other chosen beneficiaries.

Here are five questions everyone should consider.

Q: What is the current value of the estate?

A: The starting point is to understand what assets form part of your estate, including any property, savings and investments, valuable personal possessions, business interests, life policies and private pensions. Knowing the answer to this question will help you work out whether your estate will exceed the available allowances and how much inheritance tax planning may be needed.

Q: What is the current Inheritance Tax threshold?
A: The current Inheritance Tax threshold is £325,000. In some cases, an additional £175,000 allowance applies if a home is left to children or grandchildren, meaning an individual may pass on up to £500,000 before inheritance tax becomes due. Married couples and civil partners can often combine their allowances, potentially increasing the threshold to £1 million. A review of your will may identify inheritance tax planning opportunities which could otherwise be missed.

Q: Are lifetime transfers between married couples or civil partners exempt from Inheritance Tax?

A: Yes, lifetime transfers between married couples or civil partners are generally exempt from inheritance tax. In most cases this means one spouse or civil partner can transfer cash, property or other assets to the other during their lifetime without creating an immediate inheritance tax charge. In most cases this exemption is unlimited, making it an important part of inheritance tax planning for couples.      

Q: How can lifetime gifting reduce Inheritance Tax?
A: Lifetime gifting can reduce inheritance tax by removing assets from your estate either immediately or from 7 years after the date of the gift. This can be a particularly useful inheritance tax planning tool for assets which may increase in value over time. However, if inheritance tax planning is left too late, the options available may limited or a gift may not be structured in a way which will benefit your estate.

Q: What other lifetime gifting allowances are available?
A: An individual can give away up to £3,000 each tax year. If this allowance is not used in a particular tax year, it can be carried forward one year. Small gifts of upto £250 per person, certain wedding gifts and regular gifts from surplus income may all be exempt if conditions are met. These allowances can be useful for reducing an estate over time.

Should you need expert legal advice regarding any of the above or indeed any other estate planning matter, please contact Kimberley Ohikere at Kimberley.Ohikere@fieldingsporter.co.uk or another member of the Wills and Probate Team telephone on 01204 540 900.

The contents of this article are for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.