People don’t plan to fail, but they do fail to plan

Don’t fall foul of the rules

30 to 40 something’s

If you are married or in a civil registered partnership, assets pass to each other on death IHT free and since the last Pre-Budget Report you can also now inherit each other's nil-rate tax allowance (£300,000 each for the tax year 2007/08).

Writing a Will is also one of the key parts of starting to plan for IHT. This gives your executors considerable flexibility to try and reduce even further any tax that may become due when you die. In particular if you are married, by setting up trusts for your children.

Life insurance can be used to assist your heirs to pay an IHT bill with the proceeds paid IHT-free if written in an appropriate trust. Many insurers do not offer this facility unless you ask.

By using lifetime nil-rate band trusts, a couple could potentially put over £1.8m outside the IHT net over a period of 21 years. You could put a sum equal to your IHT allowance into a trust every seven years and, provided you live seven more years, there should be no IHT payable on it. Professional advice should always be taken first to discover whether this option is appropriate for your particular situation.

Ensure pension plans are written in trust as death benefits on policies not written in trust could potentially be taxable.

Take tax advice early as decisions about how you build up investments could have major repercussions later on and may trigger avoidable capital gains tax bills if you later decide to give away assets.

50 to 60 something’s

In this age bracket it is crucial to review your Will and tax plans every year if your circumstances alter, regulations change or you become substantially wealthier.

You could consider helping your children purchase a property. A family where, for instance, both parents and all the children each have a property in their own name should, in most circumstances, pay considerably less tax than one in which the parents own all of them.

Business property relief is available for family businesses, potentially reducing the IHT bill to nil on these assets. But the law is complex, and changing, so once again professional advice should be taken.

If your investment risk for reward attitude is high, then making investments in Alternative Investment Market (AIM) stocks and other similar vehicles may offer IHT relief. Always take professional advice first to assess your situation.

70 to 80 something’s

Review your Will and tax plans as you did in your fifties and sixties and consider making regular gifts from income and using your gift allowances. Such gifts are free of IHT. It is important that you keep records to help your executors, as HM Revenue & Customs have become more suspicious about whether such gifts meet the criteria.

Make other gifts that fall outside of the IHT net if you live seven years after making them. As transfers between spouses and civil registered partners are tax-free, it is often better to transfer an asset to the younger, healthier partner who is more likely to live longer and who can then give it away.

Leave your affairs in order with lists of assets and account numbers as well as notes proving entitlement to relief’s such as business property or gift relief. IHT is payable six months after you die so it makes sense to leave your affairs in a tidy state to make the process less stressful for your heirs.

If you require any further information about the services that we provide or would like to review your financial planning position, please contact us

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