Last year, HMRC collected a record-breaking £4.9bn from inheritance tax (IHT). Recent research illustrated that 6% of consumers aged 55 and over that seek financial advice from an Independent Financial Advisor have not considered IHT planning, despite IHT taking 40% of a total qualifying estate.
I believe that the reason for the record breaking inheritance tax collection is that financial planning is being conducted on an individual basis, rather than incorporating other family members. Instead of considering bequeathing assets to children alone, it is worth considering how grandchildren and great grandchildren can benefit. This is where expert advice from a financial adviser is needed.
One of the main ways to lower the inheritance tax bill is to think about how much income is required in retirement and how long this needs to last. Once this has been established, financial advisers then need to find out whether that income target can be reached based on an assessment of available assets. When there are surplus assets, IHT planning needs to be considered and Trusts can be setup that are exempt from IHT, however, once the assets are in the trust the individual loses control of them.
In relation to property, the Nil Rate Band remains at £325,000, meaning that estates exceeding that worth could be liable for IHT. However, the government has introduced the Residence Nil Rate Band (RNRB) from April 2017, which grants homeowners a further £100,000 before being subject to IHT. This is further set to increase annually by £25,000 until 2020.
There is an old saying that ‘you can’t take it with you’ – but the money still needs to last until the end. Inter-generational planning is about striking a balance between providing for each of the individuals with the right tax-efficient income to cover different needs at various stages of their life. The right advice at the optimum time is crucial in ensuring each generation can share in the family’s wealth both today and in the future.
As a company we have run numerous seminars around the RNRB and IHT planning and it is still surprising how many people either don’t have a will in place or their current will doesn’t express their wants and desire should the worst happen. IHT planning is of a very individual nature, but with some simple steps and inter-generational planning being at the cornerstone of the discussion there is no doubt of huge savings and families benefiting in the long run.
We are hosting a FREE Residence Nil Rate Band seminar on the 13th of June at The Mercure Bowdon Hotel where we will be there to answer all your questions surrounding IHT planning. Please call us on 0161 926 9350 or email us email@example.com to reserve your place today.